Data showing a disappointing Q3 December 2008 gross domestic
product (GDP) growth pulled the key benchmark indices sharply lower
in mid-morning trade. Selling was witnessed in IT, auto, banking,
realty stocks and index heavyweight Reliance Industries (RIL). The
BSE 30-share Sensex was down 192.36 points, or 2.15% and was near
the day's low. Weak rupee and dismal global economic data also
weighted on the sentiment.
India's GDP grew a slower-than-expected 5.3% in Q3 December 2008 as
the global economic crisis cut demand and exports. The figure is
sharply lower from 7.6% in Q2 September 2008. The manufacturing
sector fell 0.2% in in Q3 December 2008 from a year earlier, while
the farm sector contracted an annual 2.2%, government data showed
on Friday, 27 February 2009. India's economy grew 7.6% in the
September 2008 quarter and 7.9% in the June 2008 quarter. India has
estimated the economy to grow 7.1% in 2008/09, slowing from the 9%
in the previous year.
Meanwhile, a sharp slide in rupee which hit a record low against
the dollar heightened worries that some foreign funds may refrain
from buying stocks. The rupee today hit a record low against the
dollar. A fall in rupee reduces the valuation of the portfolio of
foreign funds to that extent. The impact can be mitigated by
hedging. Currently, foreign funds are dependent on the relatively
less transparent over-the-counter markets. Foreign funds are not
allowed to trade in currency futures market in India.
In fact, foreign funds are in selling mode in Indian stocks, having
dumped shares worth Rs 6431.90 crore in calender year 2009 (till 25
February 2009).
Concerns about rising borrowing costs for Indian corporates linger
in the minds of investors as fears of a downgrade of India's
sovereign rating by global rating agencies loom large. Rating
agency S&P on Tuesday, 24 February 2009, cut its outlook on India's
long-term sovereign credit rating to negative from stable citing
worsening government finances, which could raise Indian firms'
overseas borrowing costs and weaken the rupee. Moody's Economy.com
on Wednesday, 25 February 2009, said India's wider fiscal deficit
will boost funding costs and weaken investor confidence.
Meanwhile, global economic data continued to paint a worsening
picture of the global economy. Data on Thursday showed US jobless
claims hit a 26-year high, while Japanese data early Friday
confirmed the bleak outlook for the world's second biggest economy,
with industrial output falling 10.0% in January 2009 and shipments
down 11.4%, the biggest on-month falls on record.
Asian markets were trading mixed today, 27 February 2009, as
technology companies gained on brokerage upgrades and commodity
shares advanced on higher metal prices. Key benchmark indices in
Hong Kong, Taiwan, Singapore, and Japan were up by between 0.17%
and 1.24%. Indices in China and South Korea were down 0.21% and
1.42%.
US markets ended lower on Thursday, 26 February 2009, in volatile
trade as a spate of sour economic data and worries that President
Obama's budget proposal will strangle profits forced investors to
sell off stocks across the board. The Obama administration sees the
FY09 deficit at $1.75 trillion.
The Dow Jones industrial average declined 88.81 points, or 1.2%, to
7,182.08. The S&P 500 index slipped 12.07 points, or 1.6%, to
752.83 and the Nasdaq Composite index lost 33.96 points, or 2.4%,
to 1,391.47.
Obama proposed almost $1 trillion in higher taxes over the next
decade on the highest-earning Americans, Wall Street financiers,
US-based multinational corporations and oil companies to pay for
permanent tax breaks for lower earners.
At 11:26 IST, the BSE 30-share Sensex was down 192.36 points, or
2.15%, to 8,757. At the day's low of 8,750.34 the Sensex lost
204.52 points in mid-morning trade. At the day's high of 8,944.11
Sensex fell 10.75 points in early trade.
The S&P CNX Nifty was down 64.05 points, or 2.3%, to 2,721.60.
The market breadth, indicating the overall health of the market,
turned weak on BSE with 769 shares advancing as compared with 1,114
that declined. A total of 80 shares remained unchanged. The bread
was positive in early trade before the GDP data
From the 30 share Sensex pack 28 stocks fell while rest rose. ACC,
Reliance Communications, Bharti Airtel fell by between 3.19% to
5.12%.
India's largest private sector company by market capitalization and
oil refiner Reliance Industries (RIL) fell 2.24% to Rs 1,261 on
fears a worsening global economy will hit demand for
petrochemicals.
India's largest drugmaker by sales Ranbaxy Laboratories fell 1.06%
extending fall after the US Food and Drug Administration (US FDA)
on Wednesday, 25 February 2009, said Ranbaxy falsified data of over
two dozen drugs made in Poanta Sahib plant in India and it will
halt approval of pending and new drugs from the plant. The
allegation sent the Ranbaxy stock tumbling 18% in a single trading
session on Thursday.
Meanwhile, Daiichi Sankyo, the new owner of India's largest
drugmaker Ranbaxy Laboratories, said it has formed a team to solve
the ongoing issues with the US drug regulator.
Outsourcing focussed IT firms extended fall on fears a weak global
economy would cut the amount firms spent on technology and on fall
in ADRs overnight. India's third largest software services
exporter, Wipro fell 2.99% as its ADR fell 1.82% overnight. India's
second largest software services exporter Infosys Technologies
slipped 2.2% as its ADR fell 1.71% overnight. However India's
largest software services exporter by sales TCS fell 2.47%.
IT firms derive a lion's share of revenue from exports to US. There
have been concerns of cut back in technology spend by global firms
amid a recession in the US economy and due to the global financial
sector crisis.
IT stocks fell despite rupee hitting a record low against the
dollar. The rupee weakened to an all-time low past 50.65 against
the dollar early on Friday, weighed down by heavy dollar demand
from importers to meet month-end commitments. The partially
convertible rupee was at 50.75 and weaker than its Thursday's close
of 50.45/47. 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 steel maker by sales Tata Steel fell 0.8% to Rs
161.80 off the day's high of Rs 165.20 ahead of the announcement of
Q3 December 2008 consolidated result of the company today. The
steel maker is seen reporting a hefty consolidated loss.
Other metal stocks, Hindalco Industries, National Aluminum Company,
Steel Authority of India and Sterlite Industries, fell by between
0.64% to 5.51%.
India's largest commercial vehicle maker by sales Tata Motors
gained 0.67% extending gains for the second straight day after
company said bookings for its Rs 1-lakh car Naco will commence from
the second week of April 2009. The stock had jumped 7.26%
yesterday, 26 February 2009 boosted by the announcement during
trading hours
But other auto stocks fell on profit taking after recent strong
gains. Mahindra & Mahindra, Maruti Suzuki India and Hero Honda
Motor fell by between 1.03% to 4.93%.
Banking stocks fell as fears of rising defaults in a weakening
economy and on fall in American Depository Receipts (ADRs) offset
hopes a further fall in interest rates may boost lending growth.
India's largest private sector bank by net profit ICICI Bank fell
2.71% to Rs 315.75 off the day's high of Rs 328.50 as its American
Depository Receipts (ADR) slipped 5.17% on Thursday, 26 February
2009. Recently, Life Insurance Corporation of India 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 0.61% to Rs 1,017.60 off the day's high of Rs
1,037.80. The Indian government on Tuesday 24 February 2009
introduced a bill in Parliament which will enable it to increase
the capital base of State Bank of India's subsidiaries and issue
preference and bonus shares of these entities. However, India's
second largest private sector bank by net profit HDFC Bank slipped
3.33% as its ADR fell 1.93% on Thursday.
As per the latest data by the Reserve Bank of India, the banking
sector lent over Rs 10000 crore in the fortnight ended 13 February
2009. Food credit rose Rs 547.82 crore, while non-food credit rose
went up by Rs 9124.95 crore. This is the highest fortnightly growth
in bank loans since November 2007.
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.
Rate sensitive realty stocks fell on recent reports falling
interest rates have failed to revive housing demand. DLF, Unitech
and Indiabulls Real Estate fell by between 1.97% to 2.94%. Most of
the realty deals including sale of commercial property and housing
sales are driven by finance.
Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) on
Thursday, 26 February 2009, approved a scheme to encourage states
to increase the supply of land and construct 10 lakh affordable
houses. The Centre will provide finance assistance of Rs 5000 crore
over the next four years for the affordable housing projects.
Construction and development is envisaged in public-private
partnership (PPP) mode. Private Sector developers and builders as
well as state housing boards are expected to be partners to the
government and construct and develop projects with funding from
institutional sources. Real estate developers looking to affordable
housing during the downturn will now have an opportunity to take up
projects where demand for housing is still high, a release by the
government after the CCEA meeting said. The urban housing shortage
is estimated at 24.7 million, largely for the weaker and low income
households.
KNR Constructions jumped 5% after a joint venture of the company
bagged an order worth Rs 576.38 crore from Hyderabad Growth
Corridor for a road project in Hyderabad.
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