Weak global cues, disappointing L&T nos thrashed mkts
It was a dreadful session for the markets, as benchmark indices have given up 70-75% gain, which they had seen in first two days of this week. It seemed that markets fizzled out two days pullback rally due to bad global cues, wherein financial stability is still big concern for global banks. Asian and European markets have witnessed huge selling pressure. The Sensex has closed below 10,900 and the Nifty tanked below 3350.
Redemption pressure has led this sell off. Incremental flows are negative at FII desk; selling in metal pack continues. A leading foreign fund has turned negative on the metal sector. L&T has failed to impress street by its second quarter numbers; entire capital goods space is under pressure post results. Midcap and small cap stocks are still vulnerable to margin call pressure.
Finance Minister P Chidambaram said that the inter-bank lending still remains constrained and that it was important to enhance credit limits. The government and the Reserve Bank of India or RBI have agreed that measures have to be taken immediately, he said.
RBI is going to announce some measures in the evening to ease liquidity in financial system; experts feel that this news would be good for tomorrow's gap up opening. But nervousness in global markets due to financial instabliity could nullify RBIs move.
Liquidity concerns have taken a centrestage, a high-powered panel of bankers met in Mumbai to assess the needs to boost credit flow and the announcement is likely shortly. After speaking to three-four Chairmen from the meeting, Suvashree Ghosh of NewsWire18 said that they have lobbied for a CRR, Repo and an SLR cut in the meeting. “They explained that further liquidity will be injected in the system and measures will be taken to ensure that there is adequate credit flow across the sectors.”
Experts feel that CRR cut may be between 50-100 bps. SLR is also expected to be cut and interest caps on NRI deposits may be removed. There are not much hopes of repo cut, but that would not be ruled out.
Shankar Sharma of First Global feels RBI's last few CRR hikes may have been excessive. On liquidity, Sharma said India had a lot of liquidity but it was sucked out by RBI. "The central bank may be slightly behind the curve in freeing liquidity. Sentiment in market has soured, so fresh liquidity may not work. The Monetary Policy may not change the course of downward trend."
Larsen and Toubro crashed 11% on the back of dissappointing second quarter numbers. The company's Q2 topline is in line while bottomline is below street expectations. Net sales stood at Rs 7682.20 crore and net profit at Rs 460.26 crore while CNBC-TV18 estimated numbers were Rs 7,314 crore and Rs 494 crore, respectively. Margins also declined to 8.8% from 10.7% YoY.
Speaking on L&T numbers, Ajay Parmar, Head-Ideas Research at Emkay Global Financial Services, said, "Results of a company like L&T gives a perspective of the entire industry. If the margin goes from 10% to 8%, an almost 25% cut, then it seems that the slowdown in the industry has now been getting crystallized into numbers.” He sees tough times ahead for engineering companies and that is the reason for the fall in the L&T stock."
BSE Capital Goods index plunged 788.19 points or 8.88% to 8,088.01. Areva T&D, Punj Lloyd, Crompton Greaves and Thermax fell 12-14%. Elecon Engg, Suzlon Energy, BEML, ABB, Alstom Projects and BHEL lost 6-8%.
The BSE Sensex plummeted 674.28 points or 5.87%, to settle at 10,809.12, after hitting an intraday low of 10,760.33. The NSE Nifty Fifty has touched an intraday low of 3324.55, before closing the day down by 180.25 points or 5.12% at 3338.40.
The BSE Midcap Index tumbled 171.55 points or 4.41% to 3,720.48 and the Small Cap Index closed at 4,393.45, down 222.44 points or 4.82%.Short build continued in Nifty futures; it ended at 0.6 premium. Aggressive short build up was seen in Index heavyweights. Aggressive short build up was also seen in infrastructure stocks post L&T results and short build up continued in Metal stocks. Fresh Short build up was seen in IT stocks as well.
Among the frontliners, Jaiprakash Associates, Reliance Communication, Reliance Infrastructure, L&T, Tata Steel and Sterlite Industries fell 10-14.5%. Not a single stock was in green on the Sensex while only three stocks namely Sun Pharma, BPCL and Hero Honda were in green on the Nifty.............MOre Weak global cues, disappointing L&T nos thrashed mkts
Sensex slips below 11K again; L&T tumbles 11%
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RBI cuts CRR by 100 bps to 6.5% / CRR cut again
RBI cuts CRR by 100 bps; announces measures to improve liquidity
The Reserve Bank of India, or RBI, has cut the CRR by 100 bps to 6.5% with effect October 11, reports CNBC-TV18. CRR is the amount that banks park with the central bank. The move will inject Rs 40,000 crore into the system.
The banks may borrow up to 50% of free Tier-I from foreign branches. The 0.5% NDTL Leeway on SLR will be in addition to 1% given since September 16. The additional leeway on SLR is purely a temporary measure to meet mutual funds’ cash needs. The central bank said it has been continuously monitoring the liquidity situation. The banks can borrow 0.5% more of NDTL at the special repo to lend to mutual funds. The rate ceiling on 1-3 year NRE(E)RA deposit will be Libor plus 100 bps. The higher FCNR(B), NR(E)RA deposit rates are effective immediately.
On October 10, RBI had cut the cash reserve ratio, or CRR, by 150 basis points to 7.5% to infuse liquidity into the system. This included a 50 bps CRR cut on October 6.The cut injected liquidity to the tune of Rs 60,000 crore into the system.
Earlier today, Finance Minister P Chidambaram said RBI will provide Rs 25,000 crrore to lending institutions immediately, reports CNBC-TV18. "It will give Rs 7,500 crore to commercial banks and Rs 17,500 crore to Nabard, or National Bank for Agriculture and Rural Development."
RBI’s measures have infused considerable additional liquidity into the market, he said. "The central bank will enable smooth flow of credit for term loans and working capital."
MOre @ RBI cuts CRR by 100 bps to 6.5%
CRR cut may soften lending rates: Bankers
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L&T Q2 net up 32% / L&T Q2 net up 32% at Rs 460 cr
Larsen and Toubro Ltd has posted 32 per cent rise in net profit at Rs 460.2 for the second quarter ended September 2008 against Rs 348.02 crore in July-September 2007.
The engineering and construction major posted a 42 per cent increase in its total income for Q2 at Rs 7,842.2 crore as against Rs 5,523.2 crore in same periods last year, according to filing with Bombay Stock Exchange.
The earnings per share after extra-ordinary item was Rs 15.74.
On October 08, the company allotted bonus equity shares of Rs 2 each, fully paid up, and in the ratio of one bonus share for every existing share to all registered shareholders as on the record date (October 3, 2008).
The earnings per share data disclosed above exclude the effect of the allotment of bonus shares.
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Source: ET,SIfy,BS etc