Sensex Falls 1.7%; Banks Lower Rates

123jump.com Staff
22 Dec, 2008
New York City

India plans to introduce new tax code to prevent treaty shopping. Oil prices may be lowered before the election announcement. Banks lower rates to sustain lending. State Bank of India, Bank of Baroda and HDFC Bank passed on recent cut in rates to borrowers.

[R]10:00AM New York, 7:30 Mumbai - India plans to introduce new tax code to prevent treaty shopping. Oil prices may be lowered before the election announcement. Banks lower rates to sustain lending.[/R]

Indian stocks dropped as investors locked gains ahead of the expiry of near month derivative contracts on Wednesday.

Stocks had earlier rallied after State Bank of India on Saturday cut its lending rate by 75 basis points and slashed its deposit rates by 25 basis points to across maturities effective January 1, 2009.

In Mumbai, the BSE 30-share Sensex index fell 1.7% or 171.56 to 9,928.35, and CNX Nifty tumbled 1.2% or 38.20 to 3,039.30.

Of the stocks traded on BSE, 1,276 rose, 1,258 declined, and 82 were unchanged.

Trading Statistics

Daily turnover on BSE declined to 3,849 crore rupees from 5,066.77 crore rupees on Friday last week.

Government Might Lower Fuel Prices

Economic Times of India reported today that a senior petroleum ministry official said the government may lower petrol, diesel and domestic LPG prices before general elections announcement in February.

Government recently reduced petrol by 5 rupees per litre and diesel prices by 2 rupees per litre after international crude oil prices have declined 75% from the peak in July. Profits at government controlled oil companies have continued to widen on a sharp fall in oil prices.

“This period (till February) will be used to monitor the movements in international prices. There is no point in cutting fuel prices just now and then having to raise it again if oil makes a retreat,” the official was quoted in the Times.

New Tax Code to Stop Treaty Shopping

Separately the online edition reported today that the government is mulling provisions in the new direct tax code to prevent the misuse of double taxation avoidance agreements before the end of the year.

Treaties are designed to eliminate the double taxation of income or gains arising in one country and paid to residents of other countries. The tax authorities expect to release a draft code to public but did not indicate when.

Gainers & Losers

Reliance Industries fell 5.1% to 1,318.80 rupees on news eight American lawmakers have asked the Export-Import Bank of United States to immediately suspend all financial assistance to Reliance Industries until it agrees to halt gasoline sales to Iran.

ONGC advanced 0.1% as crude oil prices rose 2.6% to $43.44 per barrel on speculation OPEC will cut production next month.

Cairn India gained 4.7% following an oil and gas discovery near its existing field in Rajasthan.

Bharat Heavy Electricals fell 2.4% despite winning a contract worth 1,175 crore rupees from Jaiprakash Power Ventures to construct a 500-megawatt thermal power plant in central India.

Financial stocks were mixed. SBI fell 1% to 1,274.35 rupees and ICICI Bank slipped 5.5%.

Housing Development Finance Corporation declined 1.8% after it cut its retail lending rates by 50 basis points today.

Union Bank of India fell 2.2% after the bank cut its deposit rates across various maturities between 0.5% and 1.5% on Friday, but Bank of Baroda rose 2.2% after the bank cut benchmark prime lending rate by 75 basis points to 12.5% and deposit rates by 0.5% and 1% across all maturities from January 1, 2009.

IT stocks fell. Rupee declined to 47.33 against the dollar from 47.25 on Friday.

Wipro fell 0.9% to 246.60 rupees, Infosys dropped 0.4% to 1,181.60 rupees, Tata Consultancy Services plummeted 0.6% to 510.35 rupees and Satyam Computer Services tumbled 0.3% to 162.40 rupees.

Northgate Technologies increased 5% after foreign fund Swiss Finance Corporation Mauritius shored its stake in the company to 6.4%.

Indiabulls Real Estate plunged 4.8%, but Unitech surged 3.4% on reports ITC, Accor, and a group of high net worth individuals are bidding for six hotel properties owned by the real estate developer.

Tata Motors climbed 4.9% on reports that the company plans to inject funds into Jaguar Land Rover to prevent a cash flow crisis.

Ranbaxy Laboratories rose 2.1% on reports it is planning to sell three of its manufacturing units in China, Vietnam and Malaysia in order to “rationalize its business portfolio and cut costs.”

Aurobindo Pharma surged 9.4% after it received approval to launch four drugs in South Africa.

GMR Infrastructure gained 3.2%. BGR Energy Systems soared 2.3% and Taj GVK Hotels & Resorts rose 4.9% after the company opened a new five star hotel at Chennai, Tamil Nadu.