Sensex Tracks Global Losses

123jump.com Staff
19 Aug, 2008
New York City

Mumbai stocks edged lower on a continued weakness in the global credit markets as more worries mount on the health of the two largest government agencies. U.S. unwillingness to stabilize two largest mortgage lenders continues to send shock waves around the world. The proposed strike at the State Bank of India and other state run banks is not likely to affect trading on stock exchanges according to the Bombay Stock Exchange.

[R]10:00AM New York, 7:30 PM Mumbai - Credit woes haunt Sensex.[/R]

Market Sentiment

Stocks in India declined on a weakness in consumer durables, IT and auto stocks on mounting fears over lingering credit market related losses in the U.S. destabilizing world credit markets.

In Mumbai, the BSE-30 share Sensex declined 0.7% or 101.93 to 14,543.73, and the CNX Nifty fell 0.56% or 24.8 to 4,368.25.

Of the stocks traded on the BSE 1,107 rose, 1,514 declined, and 90 shares were unchanged.

Trading Statistics

Daily turnover on BSE stood at 3955 crore rupees from 3,847.50 rupees yesterday.

Reliance Infrastructure rose 2.26% to 994.30 rupees followed by increases in Hindalco Industries of 2.08% to 132.35 rupees, in Hindustan Unilever of 0.7% to 243.45 rupees, and HDFC Bank of 0.59% to 1207.45 rupees.

State Bank of India Strike Unlikely to Affect Settlements

Reuters News reported today that the Bombay Stock Exchange said a strike called by the Indian banking unions protesting the consolidation of the state-run banks is unlikely to affect settlements, but cash rates may tighten as state run-banks contribute the bulk of the cash on the money market.

Three unions have lined up demonstrations and rallies for Tuesday and Wednesday. However not all of the state banks will be involved in the industrial action.

In addition, private banks such as ICICI Bank and HDFC Bank, which have no unions, will also not be affected.

U.S. Treasury to Bailout Fannie Mae and Freddie Mac

The U.S. weekly Barron’s reported on the weekend that according to an insider in the Bush Administration the Treasury is urging mortgage lenders Freddie Mac and Fannie Mae to raise more capital.

However Government doesn’t expect the two companies to be able to raise approximately $10 billion each that is required to maintain its credibility and the U.S. Treasury may have to inject the funds. The report notes that Fannie and Freddie may each have a negative $50 billion in asset value after accounting for deferred tax assets and generous asset valuation.

An intervention by the Treasury may involve preferred stock carrying a seniority, dividend preference and convertibility rights. Existing shareholders will effectively be wiped out.

Gainers & Losers

Consumer durable stocks fell on concern economic conditions will continue to deteriorate in the U.S. Asian Star Company slumped 6.04% to 1,230.50 rupees, Videocon Industries declined 1.89% to 272.75 rupees, Lloyd Electric slid 1.7% to 83.65 rupees, Titan Industries fell 1.05% to 1,205 rupees, and Rajesh Exports slipped 1.01% to 49.20 rupees.

IT stocks also fell on similar concerns. Satyam Computer Services dipped 3.21% to 405.65 rupees, Infosys plummeted 0.529% to 1,693.55 rupees and Tata Consultancy Services shed 0.2% to 840.10 rupees.

Auto stocks closed lower. Maruti Suzuki India plunged 3.9% to 616.20 rupees, Mahindra & Mahindra lost 1.21% to 561.20 rupees and Tata Motors tumbled 0.46% to 423.35 rupees.

Ambuja Cements fell 0.44% to 79.80 rupees on reports that the company is considering expanding to the South Indian market by sea route.

ITC edged down 2.05% to 183.75 rupees.

State Bank of India slipped 0.96% to 1,443.80 rupees after the lender’s chairman O.P. Bhatt said it will proceed with plans to acquire State Bank of Saurashtra despite the planned industrial action by workers at state controlled banks.

However ICICI Bank rose 2.01% to 678.35 rupees after selling $275 million from its credit derivative portfolio in its foreign branches.

Reliance Industries declined 0.16% to 2,221.35 rupees.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 300.40 or 2.28% to 12,865.05, Hang Seng index in Hong Kong decreased 446.30 or 2.13% closed to 20,484.37. ASX 200 index in Australia decreased 118.60 or 2.38% to close 4,866.40. The KL Composite index in Malaysia decreased 14.94 or 1.38% closed to 1,069.42.

The Kospi Index in South Korea decreased 26.30 or 1.68% to close at 1,541.41, SET index in Thailand closed lower 5.90 or 0.85% to 691.33 and JSE Index in Indonesia decreased 42.65 or 2.05% to 2,042.50. The Sensex index in India decreased 101.93 or 0.70% closed to 14,543.73.