Sensex Drops 4%, Inflation Rises

123jump.com Staff
06 Nov, 2008
New York City

Stocks in Mumbai fell after the annual wholesale inflation at the end of third week in October rose to 10.7%. The increase in inflation is likely to limit future rate cuts from the Reserve Bank of India. Foreign investors continue to sell stocks in India. Oil meal exports from India dropped 40%.

[R]10:00AM New York, 7:30 PM Mumbai - India’s wholesale inflation rose 10.7% in the week to October 25.[/R]

Market Sentiment

Indian stocks fell 3.8% after annual inflation unexpectedly rose in the week to October 25, derailing hopes of further interest rate cuts by the central bank.

Trading was highly volatile.

Foreign institutional investors sold equities worth 511.53 crore rupees according to media reports.

In Mumbai, the 30-share BSE Sensex fell 3.8% or 385.79 to 9,734.22, and the Nifty declined 3.4% or 102.30 to 2892.65.

Daily turnover on BSE declined to 3,841 crore rupees from 4,983.72 crore rupees yesterday.

Inflation Rises to 10.7%

India''s wholesale prices soared to 10.7% in the week to October 25 from 10.7% from the same period a year earlier, higher than expected 10.5% by economists.

Foreign Investors 511.53 Crore Rupees

The Economic Times of India reported that foreign institutional investors sold off stocks worth 511.53 crore rupees after the Sensex lost 386 points today.

According to the Bombay Stock Exchange FIIs invested in 1,479.54 worth of crore rupees and sold shares worth 1,991.07 crore rupees.

Investors bought into shares worth 339.50 crore rupees yesterday. However, domestic institutional investors net purchased 351.57 crore rupees today. Brokers purchased 22.14 crore rupees on behalf of their clients.

Indian Oil Meal Exports Drops 40% in October

The Solvent Association of India said oil meal exports fell by 40% to 149,326 metric tons in October from 260,236 metric tons in the comparable period a year ago. The news was first reported by Economictimes.com.

Soy meal export dropped 47% to 88,273 metric tons while shipments of rapeseed meal declined 50% to 30,318 metric tons. Castor seed meal exports increased 69% to 28320 metric tons.

Exports in the three months to October however advanced 55% to 2.66 million tons from 1.72 million tons in the same period last year.

Gainers & Losers

Reliance Industries fell 7.7% after denying reports that it has closed five polyester and petrochemical plants near Mumbai on a fall in demand.

ONGC declined 1.4% and Total S.A. of France is shoring up stakes in ONGC Mittal''s Nigerian oil blocks.

GAIL India rose 1.2% on news that it may be selected as the exclusive agent to sell natural gas from Reliance Industries'' eastern offshore KG-D6 block to fuel-starved fertilizer units.

Defensive stocks gained. Sun Pharmaceuticals Industries increased 1.7% after the U.S. Food & Drug Administration approved the marketing of the generic version of Sinemet in tablet form in different strengths.

Consumer durable stocks gained. Gitanjali Gems and Rajesh Exports soared 10.2% and 3.4% respectively.

GVK Power & Infrastructure gained 9% and GMR Infrastructure rose 3.8% after announcing that it may acquire a coal mine in Indonesia.

Tata Motors fell 12.2% after it closed its commercial vehicle plant and lower its inventory of unsold trucks.

Ashok Leyland dropped 9.3% after the company posted 50.2% fall in sales to 3,397 units in October 2008 from a year ago.

Financial stocks also declined on higher-than-expected inflation. State Bank of India fell 4.6% as the lender announced a 75 basis point cut in its prime lending rate and ICICI Bank dipped 3.9%.

Tata Steel plunged 13.7% on after ArcelorMittal announced that it will slash production and stall on its growth plan. The company''s third quarter profit was below market forecasts.

Hindalco Industries fell 7.5% on news the company purchased $2 billion from the foreign exchange market to part-repay a $3.03 billion bridge loan from Canadian aluminium can manufacturer Novelis.

Sterlite Industries India tumbled 11.3% after holding company Vedanta Resources reported a 24.7% fall in profit to $350 million in the six months to September.