Sensex, Banks Drop; Lehman Bankruptcy

123jump.com Staff
15 Sep, 2008
New York City

Stocks in India and Asia declined as Lehman Brothers bankruptcy filing kept investors on the sidelines. Financial stocks in India and in the region fell as the U.S. financial crisis broaden. The U.S. regulators and the Federal Reserve scramble to arrange orderly fall of weak financial players. Merrill Lynch agreed to sell the company at near fire sale price to Bank of America. The software service providers fell sharply as more U.S. financial sector clients face troubles.

[R]10:00AM New York, 7:30 PM Mumbai - Lehman Brothers woes drag benchmark index lower.[/R]

India market averages dropped on weak global cues as investors were affected by news that U.S. bank Lehman Brothers has filed for bankruptcy protection. However news that the Peoples Bank of China has cut its key rate helped par losses.

Market Sentiment

In Mumbai, the BSE 30-share Sensex fell 3.35% or 469.54 to 13,531.27, and the CNX Nifty shed 3.68% or 155.55 to 4072.90. Of the stocks traded on BSE, 375 rose, 2258 declined and 38 were unchanged.

Trading Statistics

Daily turnover on BSE stood at 4,468 crore rupees compared with 5,103.17 crore rupees on Friday last week. Reliance Infrastructure led decliners in the index shares with a drop of 9.93% to 837 rupees.

Lehman Brothers Files for Bankruptcy

Lehman Brothers today filed for Chapter 11 bankruptcy protection as conditions continue to deteriorate in the financial markets.

Banking analysts estimated that senior unsecured debt of Lehman Brothers may not receive more than 60 cents on the dollar of debt. The fourth largest U.S. brokerage house has $613 billion in debt and $639 billion in assets. The top ten largest unsecured debtors hold approximately $150 billion of debt.

In addition, the company has about $60.2 billion exposure to risky loans at the end of the third quarter, including almost $50 billion of real estate exposure, most of which is related to commercial real estate, and $10.4 billion related to leveraged acquisitions loan financing.

Separately, Bank of America has agreed to buy Merrill Lynch & Co for $50 billion in an all-stock deal. Bank of America recently purchased La Salle Bank for $12 billion and troubled mortgage lender Countrywide Financial.

Gainers & Losers

Financial stocks recovered from losses in the morning session after the People’s Bank of China cut its key rate by 0.27% to 7.20%. However, they still traded in negative territory. ICICI Bank slipped 4.11% to 626 rupees and State Bank of India dropped 1.70% to 1,486.95 rupees.

IT stocks dropped on news that their hedging positions were improper as the rupee dropped the most in two years against the dollar. Satyam Computer Services declined 9.61% to 367.50 rupees and Wipro slid 4.47% to 401 rupees.

Reliance Industries fell 2.98% to 1,873.80 rupees on news that the government might impose a special oil tax on the domestic crude oil production under the New Exploration Licensing Policy.

Oil and gas stocks dropped. Essar Oil declined 9.33% to 168.05 rupees, Cairn India slid 7.47% to 205.10 rupees and Oil & Natural Gas Corporation plunged 6.74% to 959.90 rupees.

Commodity stocks also fell. Ispat Industries slipped 6.99% to 21.30 rupees, Jindal Steel & Power tumbled 5.62% to 1497 rupees, Hindalco plunged 5% to 115 rupees, Sesa Goa dipped 4.71% to 129.50 rupees and Tata Steel dropped 4.77% to 498.50 rupees.

Realty stocks dropped. DLF shed 7.72% to 431.80 rupees, Unitech lost 7.67% to 143.25 rupees, Indiabulls Real Estate plummeted 6.05% to 237.50 rupees, Ansal Infrastructure declined 11.81% to 78 rupees and Housing Development Infrastructure fell 12.11% to 241rupees.

Ranbaxy Laboratories, India’s top drug maker by sales fell 8.78% to 414.10 rupees. The stock has been on sustained downtrend ever since the Japanese drug maker Daiichi Sankyo’s open offer to acquire an additional 20% stake to 737 rupees a share in the company ended on 4 September 2008.

Companies with business exposure to Lehman Brothers dropped sharply. GTC Industries declined 10.95% to 111 rupees, KPIT Cummins Infosystems slipped 11.83% to 49.60 rupees, Orbit Corporation shed 10.69% to 246 rupees, Development Credit Bank lost 11.02% to 42.80 rupees, IVRCL Infrastructures slid 7.11% to 257.50 rupees, Edelweiss Capital fell 6.67% to 484 rupees, Moser Bear declined 5.72% to 100.50 rupees and Triveni Engineering slid 7.11% to 80.30 rupees.

Emami fell 1.79% to 282.80 rupees after the company said it will double the open offer price for 20% stake in Zandu Pharmaceutical Works to 15,000 rupees a share from 7,315 rupees earlier.

Crompton Greaves edged down 1.33% to 248.65 rupees after the company said it has acquired US-based electric power systems contractor, MSE Power Systems, and two of its group firms for $16 million.

Titagarh Wagons dipped 6.81% to 662 rupees after reporting that it will acquire the entire ownership and management control of a non-banking financial company.