Market Commentary 17-02-2009

Disappointment from the interim budget and weak global stocks pulled the market sharply lower for the second day in a row. The only solace for the investors was the barometer index BSE Sensex holding the psychological 9,000 level. The index fell below the crucial 9,000 level in late trade, but soon recovered. The Sensex provisionally lost 263.77 points, or 2.83%.
Selling was broad-based with realty, metals and bank stocks among major losers. Gains in select FMCG shares supported the indices at lower levels.
Not a single new scheme or tax initiative was announced in the interim budget unveiled by the acting Finance Minister Pranab Mukherjee during trading hours on Monday, 16 February 2009, disappointing the stock market. The market was expecting government to offer tax sops and sector-specific stimulus package for the economy in the interim budget.
Meanwhile, a concern among the marketmen is that the deteriorating government finances may force rating agencies to downgrade India's sovereign rating. If India's sovereign rating is downgraded, it will significantly raise the cost of borrowing of Indian firms in global markets - something the government had banked on to ease the domestic credit crunch. The financial meltdown had already reduced these inflows; a rating downgrade will put an end to them altogether.
India's rising fiscal deficit is seen at 6% of GDP at end 2008-09, much higher than the initial target of 2.5%. For the year 2009-10, it is expected to be 5.5% of GDP.
European shares hit a two-week trough in early trade on Tuesday, led lower by banking and energy stocks, as investors remained jittery over the health of the global economy and disappointing corporate results. Key indices in France, Germany and UK were down by 1.42% to 1.81%.
Asian markets, which opened before Indian market, fell as dismal Japanese growth data and fresh concerns about the financial sector fanned worries about the deteriorating global economy. Key indices in China, Hong Kong, Japan, South Korea, Singapore and Taiwan closed down between 2.17% to 4.11%. A latest survey showed Japanese manufacturers' confidence remains mired near record lows.
Data showed on Monday that Japan's economy shrank by 3.3% in the fourth quarter, its worst since the 1974 oil crisis. Meanwhile, Japanese Finance Minister Shoichi Nakagawa said on Tuesday he would resign after being forced to deny he was drunk at a G7 news conference, dealing a fresh blow to unpopular Prime Minister Taro Aso in an election year.
Trading in US index futures indicated the Dow could fall 121 points at the opening bell on Tuesday, 17 February 2009. US markets were closed on Monday, 16 February 2009 for President's Day holiday.
Countless economic stimulus packages and open promises to take more action by policymakers around the world have so far all been met with disappointment by investors, with not even the $787 billion pledged by Washington making a dent in negative sentiment.
As per provisional closing, the BSE 30-share Sensex fell 263.77 points, or 2.83%, to 9,041.68. The Sensex opened 92.05 points lower at 9,213.40, which was also the day's high so far. The indices slowly succumbed to selling pressure to slip at the day's low of 8,994.34, losing 311.11 points at the fag end of the trading session.
The S&P CNX Nifty dropped 71.85 points, or 2.52%, to 2776.65.
The market breadth, indicating the overall health of the market, was weak on BSE with 1707 shares declining as compared with 695 that rose. A total of 101 shares remained unchanged.
BSE clocked a turnover of Rs 2384 crore, lower than Rs 2,908.21 on Monday, 16 February 2009.
The BSE Realty index fell 5.10%. BSE Consumer Durables index (down 4.94%), BSE Bankex (down 4.32%), BSE Metal index (down 4.20%), BSE IT index (down 3.12%), and BSE Oil & Gas index (down 3.01%). All these indices underperfomed the Sensex.
BSE Power index (down 2.56%), BSE PSU index (down 2.51%), BSE Capital Goods index (down 1.91%), BSE Auto index (down 1.68%), BSE FMCG index (down 0.74%), and BSE Healthcare index (down 0.73%), outperformed the Sensex.
World's sixth largest steel maker Tata Steel slumped 6.98%. An official from Standard & Poor's was recently quoted by media as saying that Tata Steel's liquidity is weak on a consolidated basis. The report also said the firm could face significant refinancing risk considering the near term pressure on Tata Steel UK's financial agreements which involves about more than 3 billion pounds of debt.
India's largest aluminimum maker by sales Hindalco Industries fell 5.19%. Hindalco proposes to use its share premium reserves to write off expenses incurred by the company on its international acquisition and domestic expansion. The company's board has approved a proposal to this effect. The company has a share premium reserve of around Rs 8,500 crore.
ndia's largest private sector firm by market capitalisation and oil refiner Reliance Industries fell 4.17%. The stock has 15.59% weightage on the Sensex. The stock fell on profit booking as the government did not re-introduce an anticipated seven-year income-tax holiday for natural gas producers in the interim budget.
Petroleum Minister, Murli Deora, hinted some days back that the government may consider granting seven-year tax holiday for natural gas producers in an attempt to make the next round of Nelp (New Exploration and Licensing Policy) bidding attractive. The finance ministry had withdrawn the tax holiday last year.
India's largest private sector bank by net profit ICICI Bank which has 6.84% weightage on the Sensex, slipped 5.90%.
India's largest tractor maker by sales Mahindra & Mahindra slipped 5.10%. The stock was in demand recently after its board last week approved transfer of land systems business and naval systems business of its Mahindra Defence Systems division into separate companies. M&M is reportedly targetting revenue of of about Rs 2000 crore in five years from two defense units. The defence business currently has revenue of about Rs 100 crore. The separation is expected to create more value for its shareholders through a greater focus on them.
India's largest realty firm by market capitalisation DLF down 5.29%. Facing acute liquidity crunch and poor buyer sentiments, DLF was recently reported to have stopped work on two of its biggest mid-income housing projects. The move comes after the developer stalled at least a quarter of its commercial projects in the past few months. DLF has reportedly halted construction at DLF New Town Heights in Gurgaon Sector 90 and Express Greens in sector M1 in Manesar, both in Haryana. The two projects were launched in January and August 2008, respectively.
India's second largest listed telecom operator by sales Reliance Communication slipped 4.73%. Promoter company AAA Communication, has pledged 27.23 crore shares, representing 13.2% of its equity capital. As of December 2008, AAA Communication held 63.4% stake in RCom, while total promoter holding in the company stood at 66.1%.
Tata Power Company (down 3.83%), HDFC (down 4.87%), Sterlite Industries (down 3.45%), Maruti Suzuki (down 3.64%), and Infosys Technologies (down 3.48%), were the other major Sensex stocks that declined.
India's largest drug maker by sales Ranbaxy Laboratories declined after a firm start. The stock fell 0.17% to Rs 204.90, off day's high of 209.90. Recently some reports suggested the company got US drug regulator's nod to sell acute migraine drug sumatriptan in the US. Sumatriptan is a generic of GlaxoSmithKline's Imitrex, which has sales of nearly at $1.1 billion in the US.
Cigarette maker ITC was the only gainer in the Sensex, rising 0.25%. The stock supported the Sensex at lower level as ITC has 7.15% or third-highest weightage in the Sensex.
Information technology firm Hexaware Technologies jumped 7.02% to Rs 31.20, on reporting a net profit of Rs 36.76 crore in the year ended December 2008 as against a net loss of Rs 10.76 crore in the year ended December 2007. Net sales rose 6.3% to Rs 498.17 crore in the year ended December 2008 over the year ended December 2007. The company announced the results after market hours on Monday, 16 February 2009.
Multiplexe operator Cinemax India slumped 8.33% to Rs 34.65 after the company said its promoters have pledged more than 1.14 crore shares or 41% stake in the company.
Textiles firm Bombay Dyeing & Manufacturing Company lost nearly 3.53% to Rs 146 after the company said its promoters have pledged more than 49.72 lakh shares or 12.88% stake in the company.
Shares of Temptation Foods (down 10%) and Kohinoor Foods (20%) extended losses to hit the lower circuit for the second straight day after the market regulator Securities and Exchange Board of India pulled up Temptation Foods for falsifying shareholding information. According to the SEBI order, Temptation Foods misled investors by providing false declaration to the stock exchanges that it holds over 31.80 lakh shares representing 11.98% stake in Kohinoor Foods.
The Sensex had tumbled 3.4% on Monday as there was not a single new scheme or tax initiative in the interim budget. Acting Finance Minister Pranab Mukherjee announced some sops for millions of rural voters but there were no sector-specific tax sops for the industry hit by the global economic slowdown.
According to provisional data on NSE, FIIs were net sellers worth Rs 45.33 crore while mutual funds bought shares worth Rs 189.52 crore on Monday, 16 February 2009.
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