16 July 2008

New 15 month Low for Sensex, Nifty: ET

Market slumps to 15-month low as inflation worries persist

It was a classic example of a 'dead cat bounce' that the market witnessed on Wednesday as benchmarks collapsed to a 15-month low after a promising start. Even as global equities tumbled overnight after Fed Chairman Ben Bernanke spelled out serious economic risks facing the US, crude oil's steep fall below $139 per barrel gave a ray of hope for Indian markets, especially after being severely beaten down in the last few sessions.

However, the relief rally was short-lived as political uncertainty ahead of next week's parliamentary trust vote and worsening global credit crisis took precedence. Also, fears of inflation topping 12 per cent weighed on sentiment. Starting this week, inflation data will be released every Thursday at 5 pm instead of midday on Friday. Interest rate sensitive sectors like realty, automobiles and banks were punished the most as investors expect interest rates to inch up further if inflation continued to spike. The first sign of weakness was seen in the mid- and small-cap space, but as the day progressed, it seeped into frontline stocks as well, crippling the Sensex and Nifty.

Bombay Stock Exchange's Sensex closed at 12,575.80, down 100.39 points or 0.79 per cent after rising to an intra-day high of 12,935.25. The index fell to a new 15-month low of 12,514.02 during the day. National Stock Exchange's Nifty ended at 3816.70, down 44.40 points or 1.15 per cent. It saw a low of 3790.20 and high of 3920.05 intraday.

“The market lacks confidence as macro-economic factors and political uncertainties weigh on sentiment. I would advise investors to remain short till the market shows a convincing upmove backed by heavy volumes,” said an analyst with a local brokerage. Second line stocks were the worst affected. BSE Midcap Index declined 1.14 per cent to 5,104.66 and BSE Smallcap Index ended at 6,340.48, down 1.41 per cent.

But the standout performer was Ranbaxy Laboratories. Shortly before the market opened, the pharmaceutical major's CEO Malvinder Singh clarified on the Daiichi Sankyo stake buy and USFDA allegations over adulteration. He said there was a lot of speculation in the market due to lack of clarity on the issues and that the stock price of Ranbaxy doesn't reflect the potential of the company. He tried to put to rest rumours that Daiichi Sankyo was seeking to opt out of the acquisition.

Singh said that Daiichi Sankyo was fully aware of the USFDA issue before the deal took place. He added that the Lipitor settlement was independent of Daiichi Sankyo and there will be no change in the settlement with Pfizer. The stock, which had tanked 23 per cent in the previous two sessions, rebounded 15.02 per cent, making it the biggest gainer on the Sensex.

Other gainers were Bharti Airtel (2.87%), ONGC (2.52%), Hindustan Unilever (1.77%), Ambuja Cement (1.37%) and ITC (1.25%). DLF (down 7.73%), Jaiprakash Associates (6.09%), Mahindra & Mahindra (5.42%), HDFC (4.43%), SBI (3.32), Tata Steel (3.29%) and Tata Consultancy Services (2.98%) were the biggest losers in the Sensex. Market breadth remained weak through the day. On BSE, there were 1,803 declines and 810 advances, while on NSE there were 300 gainers and 948 losers.

Meanwhile, European stocks also declined after UK unemployment jumped the most in June since the last recession in 1992 as the economic slowdown forced companies to cut jobs and stop hiring. Claims for jobless benefits climbed for a fifth month, increasing 15,500 from May, data showed on Wednesday. The FTSE 100 declined 1.69 per cent, DAX 30 lost 0.69 per cent and CAC 40 slumped 1.02 per cent.
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Source: ET

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