The market regulator Securities & Exchange Board of India (Sebi)'s
decision to lift restriction on issue of participatory notes and
the Reserve Bank of India's surprise steep 50 basis cut in the cash
reserve ration triggered a rebound on the bourses after steep
losses of the past two trading sessions. The Sensex was up 351.70
points. Both the Sebi and RBI announcements were made after trading
hours on Monday, 6 October 2008.
A recovery in Asian stocks following a larger than expected 100
basis points cut in interest rate by Australia's central bank
today, 7 October 2008, and higher US futures contributed to early
surge on the domestic bourses. Rate sensitive banking and realty
stocks rose. Reliance Industries recovered from 52-week low.
US futures were up. Nasdaq was up by 20 points and Dow Jones
futures were up 121 points.
At 10:21 IST, the BSE 30-share Sensex was up 351.70 points or 2.96%
to 12,151.60. The index rose 253.92 points at the day's low of
12,055.62, hit in early trade,. The Sensex surged 379.73 points at
day's high of 12,181.43, in early trade.
The S&P CNX Nifty was up 117.35 points or 3.26% to 3,719.70.
The BSE Mid-Cap index was up 1.63% at 4,415.10 and the BSE
Small-Cap index was up 1.29% at 5,152.80.
The market breadth was strong on BSE with 992 shares advancing as
compared to 546 that declined. 22 shares remained unchanged.
India's largest private sector company by market capitalization and
oil refiner Reliance Industries rose 3.65% to Rs 1,700. The stock
had hit a 52 week low of 1,632.10 yesterday, 6 October 2008.
Bank shares rose after the Reserve Bank of India announced a
surprise cut in the cash reserve ratio, the proportion of deposits
that banks must keep with it, by 50 basis points to free up Rs
20000 crore. ICICI Bank (up 5.62% to Rs 518), State Bank of India
(up 3.21% to Rs 1,480) and HDFC Bank (up 2.49% to Rs 1,231.80)
edged higher.
The Reserve Bank of India (RBI), after trading hours on Monday, 6
October 2008, announced a 50 basis points cut in the cash reserve
ratio (CRR) to 8.5%, with effective from 11 October 2008. RBI said
the CRR cut is an ad hoc, temporary measure and it will be reviewed
on a continuous basis in the light of the evolving liquidity
conditions. RBI said it will give priority to liquidity management
over the period ahead given the turbulence in international
financial markets. RBI also said the overriding priority for
monetary policy is to eschew any further intensification of
inflationary pressures and to firmly anchor inflation expectations.
Rate sensitive realty stocks rose. BSE Realty index rose 3.67% to
3,110.21 and was the top gainer from the sectoral indices on BSE.
Indiabulls Real Estate (up 3.69% to Rs 150.60), Unitech (up 5.24%
to Rs 106.25) and DLF (up 3.1% to Rs 309.95) edged higher.
Jaiprakash Associates (up 4.88% to Rs 105.30), Reliance
Communications (up 4.15% to Rs 312.50) and HDFC (up 4.38% to Rs
2,051) edged higher from the Sensex pack.
ITC (down 2.3% to Rs 175.95) and Sterlite Industries (down 1.68% to
Rs 329.70) edged lower from the Sensex pack.
India's largest oil exploration firm by revenue Oil and Natural Gas
Corporation rose 4.01% to Rs 1,019.40. The company will shortly tie
up with Uranium Corporation of India for exploring and mining the
fissile material, suggest reports.
Zandu Pharmaceutical Works fell 2.13% to Rs 16,125. The Parikhs,
co-promoters of Zandu Pharmaceutical Works, are reportedly in talks
with Kolkata-based consumer products maker Emami for an
out-of-court settlement. This comes after a long-running legal
battle between the Parikhs and Emami over the control of Zandu.
ACC rose 1.53% to Rs 608. The company is reportedly exploring the
option of starting up a new hydro-power project or acquiring these
projects as part of a strategy to derive power from renewable
sources and cut costs.
The Sebi decision on lifting of restriction on P-notes comes at a
time when foreign institutional investors (FIIs) have been pulling
out their investments from India and other emerging markets to
shore up resources to beat the global liquidity crunch. In India,
FIIs sold shares worth a net Rs 8278.10 crore last month. The
outflow has reached Rs 38037.30 crore in calendar year 2008 (till 3
October 2008).
Exactly a year ago, Securities & Exchange Board of India (Sebi) had
announced stringent restrictions on P-notes, totally banning fresh
issue of P-notes with Indian derivatives as underlying. It had also
mandated unwinding of such positions within 18 months. Sebi had
also restricted issuance of P-notes in the spot segment to 40% of
assets under custody. P-notes are issued by foreign institutional
investors registered in India to unregistered overseas investors.
As per provisional data released by the stock exchanges, foreign
funds sold shares worth a net Rs 1169.33 crore on Monday, 6 October
2008. Domestic funds bought shares worth a net Rs 661 crore.
Meanwhile, with the end of third quarter of the calendar year 2008
on Tuesday, 30 September 2008, hedge fund are bracing for heavy
redemption amid US financial sector crisis which has already spread
to Europe. Investors in hedge funds are usually allowed to exit
funds only on the final day of the financial quarter. Large-scale
investor redemption in hedge funds may trigger further selling by
foreign funds in India. Hedge funds mainly operate through the
participatory notes route in India. However, there is no data
available on the quantum of hedge funds' investment in India.
The Indian stock market declined sharply in the past two days as
the global financial crisis deepened. The BSE Sensex plunged
1,253.97 points or 9.6% in two trading sessions to 11,801.70 on 6
October 2008 from its close of 13,055.67 on 1 October 2008.
The troubles that started with an overheated housing market in the
US have infected financial markets around the world, making banks
fearful of lending to other banks, let alone to businesses and
consumers. That has led to worries that economies around the world
might not only sputter but slide into reverse. Recently,
governments across Europe rushed to prop up failing banks, while
the governments of Germany, Ireland and Greece also said they would
guarantee bank deposits.
US stocks slumped on Monday, 6 October 2008, driving the Dow Jones
industrials Average to its first close below 10,000 level since
2004. The sell-off came despite the $700 billion US government
bailout package for the financial sector, which was signed into law
on Friday, 3 October 2008. At its worst point, the Dow was down
more than 800 points, an intraday record. The stock market rallied
during the final 90 minutes of the trading day, and the Dow
finished down about 370 points at 9,955.50. The tech-laden Nasdaq
Composite index lost 84.43 points or 4.34% at 1,862.96.
Asian stocks were mixed today, 7 October 2008. The key benchmark
indices in Taiwan was down by 0.08%. the key index in South Korea,
rose by 0.33%. Singapore shares reversed early losses go gain about
2.45%
Japan's Nikkei was down 1.68% after The Bank of Japan kept interest
rates unchanged at 0.5% on Tuesday, 7 October 2008, and maintained
its assessment on the economy, which it said was sluggish.
Oil bounced above $88 a barrel on Tuesday, 7 October 2008, having
fallen to an eight-month low the previous day on fears the global
economy would slip into recession.
Meanwhile, the uncertainty over the nuclear deal with India
continues as Condoleezza Rice, US secretary of state, left New
Delhi at the weekend without signing the US-India nuclear deal. The
deal is now expected to be signed by US president George Bush on
Wednesday, 8 October 2008. Cautious Indian negotiators have been
keen for Bush to sign the deal into US law and to publish a
presidential statement before signing the agreement themselves.
The agreement allows US companies to provide India with technology
for its civilian nuclear programme, ending an embargo in place
since India tested a nuclear weapon in 1974. It also gives India
international status as an acceptable nuclear power, even though it
is not a signatory to the Nuclear Non-proliferation Treaty
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