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Market crashes on nervous selling

MUMBAI — The market extended the few days old correction to one more session, as a defeat in the state polls stares the Congress in the face and weakness in Asian markets embittered sentiment in the Indian market. Nevertheless, select stocks edged up in a weak market, as investors bet on sector-specific budget sops.

The 30-share BSE Sensex lost 170.69 points (1.2 per cent), to 13,478.83. It had bounced back after an initial fall in the morning. From 13,538.67, a drop of 110.85 points for the day, the Sensex surged to 13,689 by 11:20 IST. The recovery, however, proved short-lived.

Volatility kept marketmen on tenterhooks for the second day in a row yesterday. The barometer Sensex swung 294.85 points, between a low of 13,408.56 and a high of 13,703.41.

The S&P CNX Nifty lost 48.10 points (1.2 per cent), to 3,893.90. The Nifty March futures were at 3,872 compared to the spot Nifty closing of 3,893.90.

The BSE clocked a turnover of Rs4007 crore compared to Monday's Rs3957 crore.

The incumbent Congress party is set to demit power in Punjab and Uttarakhand. The counting for assembly elections in the three states, including Manipur, began early yesterday. The results in Punjab and Uttarakhand are seen as a barometer of voters' concerns about inflation and economic reforms. However, the results will in anyway not jeopardise the Congress-led UPA Government at the Centre.

The finance minister yesterday also presented the annual economic survey to the Parliament. The pre-Budget Economic Survey 2006-07 yesterday expressed concern at rising prices and advised 'calibrated' measures to contain inflation while sustaining high growth — an indication that today's Budget may continue the overall trend of moderating taxes.

Weak Asian stocks weighed on domestic markets yesterday. Stocks in China, which topped 3,000 points for the first time on Monday, plunged almost 9 per cent yesterday, their biggest drop in 10 years. China Minsheng Banking Corp led the decline in moneylenders, as the central bank raised the reserve ratio this week for the fifth time in eight months, to cut lendable resources for banks.

Stocks in South Korea, Australia and Singapore fell from record highs on concerns about stronger oil. Shares in Japan also dropped. The BSE Small-Cap Index rose 23.84 points (0.35 per cent), to 6,918.29, and the BSE Mid-Cap Index added 9.69 points (0.17 per cent), to 5,706.40.

All sectoral indices of BSE ended in the red yesterday. The BSE FMCG Index was the biggest loser in percentage terms, shedding 34.88 points (1.9 per cent), to 1,777.38. Cigarette major ITC lost 3 per cent to Rs165.25. The key trigger for the ITC scrip, in the near term, is developments pertaining to value added tax (VAT) on cigarettes. A 12.5 per cent VAT on cigarettes will lead to a steep hike in cigarette prices, which may impact volumes. The concern for the cigarette industry is higher taxes may lead to a shift in tobacco consumption, to low-end products such as bidis and chewing tobacco.

The BSE Auto Index shed 60.65 points (1.1 per cent), to 5,305.07. Weakness was conspicuous in two-wheeler shares. Hero Honda dropped 4 per cent to Rs677, and Bajaj Auto dropped almost 4 per cent to Rs2702.90. Car major Maruti Udyog advanced expecting cuts in excise duty on cars. The car major gained 1.6 per cent to Rs888.90. The expectation is that excise duty on all cars will be brought down to 16 per cent from 24 per cent. In the last budget, the excise duty was cut to 16 per cent from 24 per cent only on small cars.

Banking sector benchmark, the BSE Bankex, lost 107.63 points (1.5 per cent), to 6,694.82. The banking sector's budget expectations centre around measures like restoration of tax deduction on interest income up to Rs15000 under section 80L and reduction in the lock-in period for savings under section 80C from the stipulated five years. Such steps will lure more term deposits for banks. There are also expectations that FII-ceiling for state-run banks may be raised from 20 per cent to 24 per cent.