Sensex, Nifty hit two-year lows

The key benchmark indices made some recovery after it hit a new
intraday low in mid-afternoon trade. The BSE Sensex was down 142.92
points. The BSE Sensex and the S&P CNX Nifty both hit two-year lows
today, 7 October 2008. This was in contrast to an initial surge
that was triggered by liquidity boosting measures by regulators.

Volatility was high. Sterlite Industries fell close to 10% while
Mahindra & Mahindra, Tata Consultancy Services and Larsen & Toubro
fell more than 6% each. Global financial sector jitteres weighed on
the domestic bourses as European stocks fell on reports the UK
government may be forced to provide funding for Royal Bank of
Scotland.

The domestic market ingnored reports that Finance Minister P
Chidambaram expects 8% GDP growth in the current financial year
notwithstanding the global financial crises.

Reliance Industries edged higher. Capital goods and IT stocks
declined. The market breadth was negative in contrast to a strong
breadth earlier in the day.

US futures were mixed. Nasdaq futures were up 1.5 points and Dow
Jones futures were down 24 points.

At 14:26 IST, the BSE 30-share Sensex was down 142.91 points or
1.16% to 11,664.65. The index fell 299.85 points at the day's low
of 11,501.85, hit in mid-afternoon trade, its lowest level in more
than two years.

The Sensex surged 379.73 points at day's high of 12,181.43, in
early trade. 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 ratio had triggered a rebound on
the bourses in early trade after steep losses of the past two
trading sessions. Both the Sebi and RBI announcements were made
after trading hours on Monday, 6 October 2008.

The S&P CNX Nifty was down 26.35 points or 0.73% to 3,628.70. Nifty
hit a low of 3,537, its lowest level since 5 October 2006.

The BSE Mid-Cap index was down 2.48% at 4,236.51 and the BSE
Small-Cap index was down 2.59% at 4,955.15.

The market breadth was weak on BSE with 652 shares advancing as
compared to 1,872 that declined. 65 shares remained unchanged.

India's largest private sector company by market capitalization and
oil refiner Reliance Industries rose 0.37% to Rs 1,651. The stock
had hit a 52 week low of 1,632.10 yesterday, 6 October 2008.

Capital goods stocks declined. Praj Industries (down 8.9% to Rs
84.95), Larsen & Toubro (down 6.57% to Rs 1,014), and Suzlon Energy
(down 3.86% to Rs 122.50) edged lower. While India's largest
electric equipment maker by sales Bharat Heavy Electricals rose 1%
to Rs 1,464.

IT stocks came off from highs. India's third largest IT exporter by
sales Satyam Computer Services declined 5.88% to Rs 277.40. The
stock came off from the session's high of Rs 308.10. India's
largest IT exporter by sales Tata Consultancy Services fell 6.32%
to Rs 580.05. The stock came off from the session's high of Rs 666.
Wipro lost 6.9% to Rs 297.55. The stock came off from the session's
high of Rs 331. India's second largest IT exporter by sales Infosys
fell 2.31% to Rs 1,288. The stock came off from the session's high
of Rs 1,372.

Bank shares pared gains after firm opening. India's largest private
sector bank by net profit ICICI Bank fell 1.52% to Rs 482.90. The
stock came off from the session's high of Rs 521.70. India's second
largest private sector bank by net profit HDFC Bank declined 6.66%
to Rs 1,121.80. The stock came off from the session's high of Rs
1,245. India's largest commercial bank State Bank of India fell
0.35% to Rs 1,429. The stock came off from the session's high of Rs
1,503.

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.

Sterlite Industries (down 9.92% to Rs 302.75), Mahindra & Mahindra
(down 7.44% to Rs 465), Tata Power Company (down 4.43% to Rs
767.80), edged lower from the Sensex pack.

Ranbaxy Laboratories (up 3.88% to Rs 256), NTPC (up 2.58% to Rs
173.05), Grasim Industries (up 2.65% to Rs 1,633) and Bharti Airtel
(up 2.64% to Rs 747.10), edged higher from the Sensex pack.

India's largest oil exploration firm by revenue Oil and Natural Gas
Corporation rose 0.7% to Rs 986.20. The stock came off from
session's high of Rs 1,040. The company will shortly tie up with
Uranium Corporation of India for exploring and mining the fissile
material, suggest reports.

GVK Power & Infrastructure fell 9.8% to Rs 17.95. The company said
today that it has divested the entire equity holding in its wholly
owned subsidiary GVK Aviation.

In Europe, France's CAC 40 was up 0.41%. UK's FTSE 100 and
Germany's DAX were down between 1.36% to 1.41%. As per reports the
UK government may be forced to provide funding for Royal Bank of
Scotland. On Monday, credit ratings agency S&P cut its rating on
RBS, citing earnings and further writedown risks.

European Union finance ministers gathered in Luxembourg on Tuesday,
7 October 2008, to discuss ways of protecting savers' deposits and
counter the market turmoil that saw the region's stock markets
suffer record losses on Monday, 6 October 2008. Australia's central
bank cut its benchmark cash rate by 100 basis points to 6%,
stunning investors with its biggest interest rate cut in 16 years.

Asian stocks outside Japan rose for the first time in four days on
Tuesday, 7 October 2008, after a surprisingly large interest rate
cut by Australia's central bank raised hopes that other
policymakers would follow suit. Taiwan stocks ended up 0.34%,
recouping sharp losses earlier in the day and rebounding from a
more than four-year closing low the previous session as government
funds helped bolster market heavyweights such as TSMC.

South Korea's KOSPI rebounded from a 21-month low and rose 0.54%.
The country's regulator said it was considering steps to reduce
volatility in the equity market, helping to stem some of the day's
losses.

China's stock market fell but ended well off its lows as hopes for
government support helped banks and property shares rebound from a
sharp early slide. The Shanghai Composite Index, which had dropped
as much as 4.64% in the morning, closed down 0.73% at 2,157.839
points. Singapore shares reversed early losses go gain about 2%.

Japan's Nikkei was down 3.03% 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.

Back home, 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 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.

Oil prices, down nearly 40% from their peak because of recession
worries, climbed back to over $90 a barrel.