Key benchmark indices jumped to trade in green for a brief period
and provisionally settled with small losses after the Indian
government on cut excise duties further and lowered service tax
rates in a move to protect the economy from the impact of the
global economic crisis. The BSE 30-share Sensex was provisionally
down 14.49 points, or 0.16%, recovering close to 210 points from
the day's low.
A bout of volatility was witnessed in the later part of the trading
session. The market slipped in mid-afternoon trade after the global
rating agency Standard & Poor's revised the outlook on the
long-term sovereign credit rating on India to negative from stable.
Just before the news of S&P cutting the outlook which hit the
market in mid-afternoon trade, a solid recovery was witnessed on
the domestic bourses
The BSE Sensex plunged as much as 2.53% in early trade on setback
in Asian stocks. The sharp sharp slide took it to the lowest level
in more than 2-1/2 months. It wiped out almost the entire losses at
about 13:50 IST just before the news of the S&P cutting the
outlook.
Government' announcement of the reductions in indirect taxes hit
the market in late trade and took the Sensex in green. However, the
barometer index slipped into the red again later
Finance Minister Pranab Mukherjee in his reply to a debate on the
2009/10 interim budget cut excise duty across the board to 8% from
10 %, and reduced the service tax rate to 10% from 12% on all
taxable services. Mukherjee also said excise duty cuts of 4%
unveiled earlier as part of a government stimulus package would be
extended into the new fiscal year. He also reduced the excise duty
on bulk cement to 8% and extended the exemption on customs cut on
naphtha beyond 31 March 2009.
Higher US index futures also supported domestic bourses. Trading in
the US index futures showed Dow could rise 24 points at the opening
bell on Tuesday, 24 February 2009. But sustained selling by foreign
institutional investors kept market sentiment edgy.
Meanwhile, S&P said the revision in rating outlook of India was due
to deterioration of the fiscal positions of the government to level
that is unsustainable in the medium term. S&P expects government
deficit, including off-budget measures such as oil and fertilizer
bonds, to increase to 11.4% in the fiscal year ending 31 March,
2009, from 5.7% in the previous fiscal year.
Standard & Poor's has, nonetheless, affirmed its 'BBB-' long-term
and 'A-3' short-term sovereign credit ratings on India.
Volatility is likely to remain high in the near term ahead of the
expiry of futures & options contracts for February 2009 series on
Thursday, 26 February 2009. As per reports, rollover of Nifty
positions from February 2009 series to March 2009 series stood at
40% while marketwide rollover of positions was 29%, as on Friday,
20 February 2009.
Heavy sales by foreign funds this year has hit market sentiment.
Foreign funds were sellers through most of last week. FII outflow
in February 2009 totaled Rs 1,180.70 crore (till 19 February 2009).
FII outflow in calendar year 2009 totaled Rs 5,425.90 crore (till
19 February 2009).
European stocks slipped on Tuesday, echoing sharp losses on Wall
Street and in Asia as lingering fears over the stability of the
banking sector rattled investors. The key benchmark indices in
France, Germany and UK fell by between 1.15% to 2.6%.
Asian shares slumped on Tuesday, some to multiyear lows, after a
broad sell-off on Wall Street left the Dow Jones Industrial Average
at levels not seen since 1997. Key benchmark indices in China,
Singapore, Taiwan, South Korea, Hong Kong fell by between 1.06% to
4.56%.
Japan's Nikkei stock average fell 1.46% dragged lower by exporters
such as Canon Inc.
Led by industrials and materials stocks, the US market fell on
recessionary fears and heightened risk aversion, which also drove
investors to the dollar. The Dow Jones industrial average dropped
250.89 points, or 3.41%, to 7,114.78, its lowest close since 7 May
1997. The Standard & Poor`s 500 index fell 26.72 points, or 3.47%,
to 743.33, lowest finish since 11 April 1997. The technology-laden
Nasdaq Composite index lost 53.51 points, or 3.71%, to 1,387.72.
Although US financial stocks actually rose on hopes that the
government will move soon to secure its most troubled banks, the
wider issue of the fragility of the US banking system remains to
the fore.
As per the provisional figures, the BSE 30-share Sensex was down
14.49 points, or 0.16%, to 8,828.72. At the day's high of 8,856.52
Sensex gained 13.31 points in late trade. At the day's low of
8,619.22, the Sensex lost 223.99 points in early trade and was the
lowest level for the Sensex since 3 December 2008.
The S&P CNX Nifty was down 5.10 points, or 0.19%, to 2,731.10.
The market breadth, indicating the overall health of the market,
was weak on BSE with 1,626 shares declining as compared with 818
that advanced. A total of 66 shares remained unchanged.
The BSE clocked a turnover of Rs 2,448 crore, lower than Rs
2,615.54 crore on Friday, 20 February 2009.
From the 30 share Sensex pack 17 stocks fell while rest gained.
India's largest private sector company by market capitalization and
oil refiner Reliance Industries (RIL) fell 0.02% to Rs 1,253.30 on
fears a worsening global economy will hit demand for
petrochemicals. Nevertheless, the stock came off the day's low of
Rs 1,201.10.
India's largest oil exploration firm by revenue ONGC rose 1.17% to
Rs 680.60 off day's low of Rs 656.25 on reports the company has
discovered oil in the hydrocarbon rich Krishna Godavari basin.
Auto stocks were mixed after the government cut excise duty
further. India's largest tractor maker by sales Mahindra & Mahindra
rose 4.92%. India's largest car maker by sales Maruti Suzuki India
rose 1.39%. But Tata Motors and Hero Honda Motor fell by between
1.23% to 2.02%.
Cement makers turned positive after the government cut excise duty
on bulk cement to 8% from 10%. ACC, Ultratech Cement, Grasim
Industries, Ambuja Cement rose by between 0.91% to 3.01%.
Banking stocks cut intraday losses on hopes the central bank would
cut rates to support faltering growth as inflation fell to its
lowest in more than 13 months in early February, dropping below 4%.
Bank stocks had slumped earlier in the day on fears of rising
defaults in a weakening economy and on overnight fall in American
Depository Receipts (ADRs). India's second largest private sector
bank by net profit HDFC Bank lost 1.16% to Rs 856.90, off the day's
low of Rs 835.10. Its ADR fell 4.31% on Monday, 23 February 2009.
India's largest private sector bank by net profit ICICI Bank
slipped 0.13% to Rs 335.50, off day's low of Rs 318.35. Life
Insurance Corporation of India has hiked its stake in ICICI Bank by
2.04% to 9.38%
India's largest bank in terms of assets and branch network State
Bank of India fell 1.75% to Rs 1,028.25, off the day's low of Rs
1,015.05. State Bank of India (SBI) on Friday, 20 February 2009,
capped interest rates on new auto loans at 10% for a year, sharply
down from the current 11.50%. Early this month, in a similar move,
SBI cut its home loan rate to 8% for a year. SBI will freeze
interest rates on new car loans taken between 23 February 2009 and
31 May 2009 for one year.
PSU bank stocks, Indian Overseas Bank, Union Bank of India, Bank of
Baroda, Bank of India fell by between 2.54% to 6.27%.
There are expectations that the Reserve Bank of India (RBI) will
cut interest rates further to support faltering growth. A sharp
fall in inflation has provided room for the central bank to cut
rates. The global financial sector crisis and recession in key
global economies have pushed economic growth in India down to a
six-year low. The Central Statistical Organisation (CSO) has pegged
India's projected GDP growth for the year ending March 2009 at
7.1%, the slowest in six years and below the previous year's 9%
rise.
Despite a steep cut in policy rates in India since October 2008,
there has not been a commensurate reduction in lending rates by
banks as fears of rising bad loans have made banks cautious in
increasing advances.
Metal stocks fell on worries a weakening domestic and global
economy will hit demand for metals. Tata Steel, Hindalco
Industries, Sterlite Indusries, Steel Authority of India fell by
between 0.64% to 4.46%.
IT pivotals recovered as lower rupee offset fears a weak global
economy would cut the amount firms spent on technology. India's
third largest software services exporter, Wipro slipped 1.44% to Rs
212.20 off the day's low of Rs 208.50. Its ADR fell 2.92% on
Monday, 23 February 2009. India's second largest software services
exporter Infosys Technologies rose 0.48% to Rs 1,184.10 off the
day's low of Rs 1,146.40. Its ADR fell 1.99% on Monday. India's
largest software services exporter by sales TCS slipped 1.57% to Rs
466.50 off the day's low of Rs 460.90.
The rupee fell on Tuesday as sharp falls in the global stock
markets raised concerns of more capital outflows from local shares.
The partially convertible rupee was at 49.89 per dollar weaker
compared to a closing of 49.72/74 per dollar on Friday. A weak
rupee boosts revenues of IT firms in rupee terms as IT companies
earn a lion's share of revenue from exports.
India's largest electric equipment maker by sales Bharat Heavy
Electricals was down 0.27% to Rs 1361.20, having recovered from the
session's low of Rs 1335, on bagging an order worth Rs 3150 crore.
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