Rupee Falls, Sensex Down 1.9%

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

Stocks in Mumbai, India declined 1.9% as financial stocks in the region declined in the wake of broadening U.S. financial crisis. ICICI Bank dropped 4.8% after it disclosed $25 million exposure to Lehman Brothers, the bankrupt investment banker. Sterlite Industries fell 8.9% to 435.25 rupees and Reliance Industries declined 3% to 1,864.70 rupees. Rupee traded to 9-year low as it reached near 47 to a dollar.

[R]10:00AM New York, 7:30 PM Mumbai – The U.S. financial markets crisis dragged technology and financial stocks lower in Mumbai.[/R]

Market Sentiment

In Mumbai, the BSE 30-share Sensex declined 1.89% or 255.90 to 13,262.90, and the CNX Nifty shed 1.64% or 66.65 to 4,008.25. Of the stocks traded on BSE 881 advanced, 1,760 declined and 82 were unchanged.

Trading Statistics

Daily turnover on the BSE stood at 5,795 crore rupees compared with 5,208.35 crore rupees yesterday. ICICI Bank plunged 4.5% as investors worried about the lingering credit market-related losses.

U.S. Extends $85 billion to AIG

The Mumbai stocks were no exceptions as financial and commodities stocks declined around the world. The financial, mining and energy stocks led the benchmark index lower as the U.S. financial crisis dragged the largest insurance company, AIG to a near collapse. The U.S. Federal Reserve was forced to extend $85 billion in emergency loans to AIG and provide much needed liquidity and a confidence boost.

The move will help AIG in the short term but failed to convince investors that this will be last capital infusion needed by the insurance company. AIG may need another $50 billion in capital if the housing market falls another 10%.

The U.S. lawmakers and global investors are still grappling with the enormity of the situation and are still in the early stages of strategy formulation. Once unthinkable, the three oldest brokerages houses, widely seen as the pillars of the U.S. financial systems are either bankrupt or sold to commercial banks. JP Morgan purchased at a distressed price Bear Stearns, Bank of America acquired Merrill Lynch, Lehman Brothers has filed bankruptcy protection and AIG is nationalized. Two largest mortgage agencies, Fannie and Freddie are also operating under the U.S. control.

Federal Reserve Bank in a statement said, ""A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.""

Of the seventy five stock exchanges tracked by 123jump.com, global investors have lost $2.9 trillion since Lehman Brothers bankruptcy filing and since the beginning of the crisis in June of 2007 global investors have lost $20.4 trillion.

RBI Increases Dollar Supply

The Reserve Bank of India yesterday boosted the dollar supply in the market as part of an intervention meant to support the strength of the rupee, which has plummeted to near 47 rupees to a dollar.

The RBI forecasts that the move will also lower bank’s borrowing cost in the overnight call money market.

Gainers & Losers

Sterlite Industries fell 8.89% to 435.25 rupees and Reliance Industries declined 3.31% to 1,864.70 rupees.

Financial stocks declined. ICICI Bank tumbled 4.75% to 563.25 rupees on news that the lender will take a $28 million hit on account of the additional provisioning that ICICI Bank''s UK subsidiary will have to make after Lehman Brothers Holdings filed for bankruptcy protection.

HDFC Bank declined 3.83% to 1,183 rupees and State Bank of India slid 4.12% to 1,520.25 rupees.

Realty stocks plunged. DLF lost 4.12% to 405.20 rupees, Unitech declined 9.32% to 127 rupees, Indiabulls Real Estate slipped 7.92% to 205.70 rupees, and Ansal Infrastruture tumbled 2.10% to 77 rupees.

Ranbaxy Laboratories dipped 4.41% to 388 rupees after the U.S. banned more than 30 generic drugs made by the company for poor quality at two of its Indian facilities.

Tate Steel was edged down 3.48% to 470.60 rupees.

Tata Motors surged 4.46% to 416.15 rupees on news that the company paid lower advance tax of 75 crore rupees in the second quarter of 2008 compared to 190 crore rupees in the same period a year ago.

Mahindra & Mahindra increased 0.14% to 534 rupees after the company paid higher advance tax of 116 crore rupees in the second of this year compared with 83 crore rupees in the comparable period a year earlier.

Oil and Natural Gas Corporation advanced 2.86% to 979.90 rupees after it agreed to give Rocksource ASA, a Norwegian company, 10% participating interest in deep water block in the eastern offshore.

IT stocks were mixed. Infosys Technologies rose 1.01% to 1,580 rupees, Satyam Computer Services fell 1.87% to 349.70 rupees, and TCS lost 2.88% to 728 rupees.

Wipro however rose 1.15% to 396.25 rupees on news the company’s software business arm Wipro Technologies and Copal Partners are considering bidding for Indian back-office unit of Lehman Brothers.

Refiners dropped as crude oil prices for October delivery jumped to $94.30 per barrel. Indian Oil Corporation slipped 5.30% to 396 rupees, BPCL fell 7.02% to 336.20 rupees, and HPCL dipped 5.45% to 235.25 rupees.