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Weakness in global markets hits domestic bourse

MUMBAI — The market recovered some of the lost ground in late trade after the barometer index BSE Sensex and the S&P CNX Nifty had tumbled to its lowest in 2008 in mid-afternoon trade. Weakness in global markets weighed on the domestic bourses. The market breadth was weak. Healthcare stocks and shares of public sector oil marketing firms rose even as IT, realty and banking stocks declined.

The 30-share BSE Sensex lost 176.85 points or 1.17per cent at 14,889.25, its lowest close since mid-March 2008. At the dayís low of 14,645.31 the Sensex lost 420.79 points in mid-afternoon trade, falling below its previous year 2008 low of 14,677.24 hit 18 March 2008.

Earlier, after opening on a subdued note on weak global cues, the market had recovered to trade in green for a brief period. At the dayís high of 15,088.03 Sensex gained 21.93 points in early trade.

As per the provisional figures on NSE, Foreign institutional investors (FII)s sold shares worth Rs 910.16 crore yesterday while domestic funds bought shares worth Rs 296.39 crore.

Bharat Heavy Electricals (up 0.54 per cent to Rs 1,382.05), Reliance Industries (RIL) (up 1.68 per cent to Rs 2,199.40), Ambuja Cements (up 0.43 per cent to Rs 82.30) and ACC (up 0.55 per cent to Rs 616.40) edged higher from the Sensex pack.

ONGC (down 4.74 per cent to Rs 831.25), HDFC (down 4.79 per cent to Rs 2,101), Jaiprakash Associates (down 3.54 per cent to Rs 177.15), Reliance Infrastructure (down 2.59 per cent to Rs 1,011.60), Tata Motors (down 0.81 per cent to Rs 512.90) edged lower from the Sensex pack.

Consumer durables stocks declined. Rajesh Exports (down 6.53 per cent to Rs 70.85), Titan Industries (down 3.73 per cent to Rs 1,088), Blue Star (down 3.26 per cent to Rs 390) and Gitanjali Gems (down 1.13 per cent to Rs 266) edged lower.

Banking stocks fell extending their recent sharp losses on concerns of further policy tightening of the monetary policy by the Reserve Bank of India to rein in inflation which is at its highest level in nearly four years. HDFC Bank (4.96 per cent to Rs 1,130.95), State Bank of India (down 1.06 per cent to Rs 1,279.10) and ICICI Bank (down 2.47 per cent to Rs 731.60) edged lower.

Software services companies, which get more than half their revenue from the United States, fell on signs the US economy was heading for stagflation. BSE IT index was the top loser from the sectoral indices on BSE. It was down 2.75 per cent to 4,283.96. Infosys (down 2.89 per cent to Rs 1,849.10), Tata Consultancy Services (down 3.89per cent to Rs 880.05), Satyam Computer Services (down 2.76 per cent to Rs 477.90), and Wipro (down 1.46 per cent to Rs 473.55) edged lower.

Healthcare stocks rose. Ranbaxy Laboratories (up 6.53 per cent to Rs 560.75), Cipla (up 2.13 per cent to Rs 211.05), Dr. Reddy's Laboratories (up 0.54 per cent to Rs 696.50) edged higher.

Shares of oil state-run oil marketing firms rose today after witnessing heavy battering over the past few days. HPCL (up 1.86 per cent to Rs 196.90), BPCL (up 2.24 per cent to Rs 284.65) and Indian Oil Corporation (up 0.91per cent to Rs 366.55) edged higher.

IFCI clocked the highest volume of 1.85 crore shares on BSE. Reliance Petroleum (1.36 crore shares), Ispat Industries (1.34 crore shares), Reliance Natural Resources (1.31 crore shares) and Spice Communications (1 crore shares) were other volume toppers in that order.

Reliance Industries clocked the highest turnover of Rs 281.98 crore on BSE. Reliance Capital (Rs 261.73 crore), Reliance Petroleum (Rs 23.74 crore), Ranbaxy Laboratories ( Rs 213.44 crore) and Anu's Laboratories (Rs 167.13 crore) were other turnover toppers in that order.

After 10 days of debate, the Union government agreed to raise retail petrol and diesel prices by about 10 per cent, more than expected, to help curb losses at its state-owned refiners. A sharp fall in the rupee against the dollar in the past few days has heightened concerns about inflation. This is because the fall in rupee will raise cost of imports which in turn will result in further rise in inflation.

According to rating agency CRISIL, headline inflation is expected to increase by 95 basis points on account of direct and indirect effects of the fuel price hike. The indirect impact which will be felt over the course of the next few months, it states in a note.

A well distributed monsoon will bolster food production, helping douse inflation. Agricultural output in India depends on good rains. The Indian Meteorological Department (IMD)'s second monsoon forecast for the crucial annual south-west monsoon (June-September) due this months which may indicate spatial rainfall distribution in the main sowing month of July 2008, will be keenly watched by market men. The IMD has forecast the 2008 monsoon rains would be near-normal and 99 per cent of the average between 1941 and 1990.

A section of the market is of the view that the central bank may only use the reserve requirement route to tame inflation, fearing any hike in rates would further hurt growth already seen moderating to a still strong 8 per cent-8.5 per cent this fiscal year from 9 per cent in 2007/08. To rein in inflation, in its monetary policy review for 2008-09 on 29 April 2008, the RBI raised cash reserve ratio (CRR) by 25 basis points to 8.25 per cent to suck out excess liquidity in the banking system. RBI often says pass-through of high global oil prices is incomplete in India, complicating policy making.