Rising Oil Dents Stocks, Rupee

123jump.com Staff
03 Jul, 2008
New York City

Rupee hovered near fifteen months low as rising crude oil price take a bite out of stocks in India. As India pass on rising international prices of oil to consumers, inflation is expected to reach further in record zone hurting corporate profits and economic growth prospects. Stocks in Mumbai trading fell as investors feared slow down in consumer spending. Automakers, banks and real estate stocks fell sharply. Rupee edged lower and is likely to drop below 43.50.

[R]10:00AM New York, 7:30PM Mumbai – Stocks and rupee declined on record oil prices.[/R]

Record Oil Drive Rupee and Stocks Lower

Stocks in Mumbai trading fell on Thursday after oil future prices rose to a record above $144 per barrel on Wednesday. India imports 70% of its crude oil requirement and spends nearly $7.7 billion a month, $2 billion more from a year ago for the commodity.

Rupee in Mumbai trading fell to 15-month low as it dropped 0.3% to 43.40 against one dollar. The currency has lost nearly 9.3% for the year so far and currency traders expect rupee to drop as low as 44 to a dollar. Rising crude oil import bill has lifted current account deficit in the record zone. Current account deficit increased to $17.4 billion in the fiscal year ending in March 2008 and is likely to rise again in the current fiscal year.

Crude oil prices have risen more than 45% for the year so far adding pressure to a decline stock market rupee value in the international markets.

After the trades, the 30-share BSE Sensex declined 4.1% or 570.51 at 13,094.11. On the National Stock Exchange, CNX Nifty index declined 4.1% or 167.6 at 3,925.75.

Of the BSE traded shares, 750 shares advanced, 1,876 shares declined and 59 shares remained unchanged. Among the Sensex index stock, 28 shares declined and 2 shared fell.

Trading statistics

Daily turnover on the BSE stood at 5,585 crore rupees and on the NSE was 12,813 crore rupees.

Reliance Capital was the most active stock on the BSE trading with a turnover of 432.06 crore rupees followed by turnover in Reliance Industries, Reliance Infrastructure, Reliance Petroleum and Reliance Natural Resources.

Reliance Natural Resources was the most active with a trading volume of 2.93 crore shares on BSE, followed by trading volume in IFCI Reliance Petroleum, Ispat Industries and Shree Renuka Sugars.

Petrol Price Review in October

Government of India will review petrol prices in October and expects its annual import bill to surge to $120 billion for the current fiscal year.

Petroleum Secretary M S Srinivasan said that in the June cabinet meeting the government has agreed to review the prices again in October.

At the time of the latest price increase of petrol and diesel fuel on June 4 global crude prices were hovering around $135 a barrel. In the last one month, crude oil prices have risen to $145 a barrel. The latest price revision is likely to fuel inflation further into record territory beyond 11.5%.

In fiscal year ending in March 2008, India imported $68 billion of crude oil. In the current year the crude oil import will rise after the start of Reliance Petroleum refinery in Jamnagar.

UK Leads Foreign Investors in India

A report by the Commonwealth Business Council showed that UK is the largest foreign investor in India.

The report, prepared by the CBC and UK Trade and Investment, a Government agency, said that when investments made by UK companies through Mauritius, the British Virgin Islands and Cyprus were included, it outstripped the US as the leading investor, with over 8 billion pounds of investment.

Over 90% of the UK''s investment last year came from large companies. Vodafone made India''s biggest foreign direct investment when the telecommunications group paid Hong Kong''s Hutchison 5.5 billion pounds for a 67% stake in Hutchison Essar, India''s third-largest mobile operator.

Gainers & Losers

ONGC rose 0.6% to 859.20 rupees on reports that company sees the cost of replacing its exploration and production infrastructure in the north-eastern state of Assam to double to around 4,000 crore rupees due to rising steel prices.

State Bank of India gained 0.6% to 1,086 rupees. Infosys declined 4% to 1,747.80 rupees.

Indiabulls Real Estate declined 8.7% to 261.45 rupees, Unitech fell 10% to 154 rupees and DLF was down 9.9% to 381.85 rupees.

Metal stocks fell. Tata Steel declined 11.3% to 657.45 rupees, Steel Authority of India fell 9.8% to 128 rupees and Hindalco Industries was down 4.6% to 135.75 rupees.

Banking stocks fell ahead of inflation data on Friday. ICICI Bank fell 7.9% to 573.85 rupees and HDFC Bank was down 3.6% to 983.80 rupees.

Power stocks fell. Tata Power Company declined 9% to 1,000.05 rupees.

ACC declined 5.9% to 472.30 rupees, Tata Motors fell 5.6% to 390.45 rupees and HDFC was down 5.1% to 1,935.50 rupees.

Reliance Companies Update

Reliance Communications fell 6.9% to 389.50 rupees. It may reportedly partner with a sovereign wealth fund in Middle East and may directly buy a large equity stake in South Africa''s MTN, thereby emerging as the single-largest shareholder.

Reliance Infrastructure fell 8.7% to 721.55 rupees and Reliance Power declined 1.5% to 130.55 rupees. Reliance Industries declined 3.4% to 2,071.10 rupees.