Tuesday, 18 November 2008

BSE Sensex falls 3.8 pct as global gloom deepens

MUMBAI (Reuters) – The BSE Sensex fell 3.8 percent on Tuesday, taking its losses to 15.2 percent over five consecutive sessions, as prospects of a global recession and massive job cuts at Citigroup rattled investors.

Promises by the finance minister the government will take steps to stimulate the economy to offset the impact of the global slowdown failed to soothe the sentiment.

Financials led by ICICI Bank, the country's second-largest lender, led the fall taking cues from its peers in regional markets that dropped on fears an economic downturn could spark defaults.

The stock fell 6.8 percent to 360.75 rupees, its lowest close in three weeks.

Top lender State Bank of India slipped 5.1 percent to 1,108.30 and the sector index dropped 4.5 percent.

The 30-share BSE index shed 3.81 percent, or 353.81 points, to 8,937.20, its lowest close since Oct. 27 when it hit a three-year low of 7,697.39.

"There is consistent selling pressure. The consensus is building the market would test its previous low," said Rajesh Jain, chief executive at Pranav Securities.

All but one of the index component fell, while in the broader market losers overwhelmed gainers in a ratio of almost 3:1 on moderate volume of 226.8 million shares.

The index fell as much as 4.5 percent in early deals and is down 56 percent so far in 2008 making it one of the worst performers in Asia.

"We will take steps to stimulate the domestic economy to compensate for the downside caused by the downturn in the world economy," Finance Minister Palaniappan Chidambaram told the World Economic Forum's India Summit on Tuesday.

He said India was likely to end the year with a satisfactory growth rate, despite the downturn in advanced economies, although he declined to put an exact number on the expected rate.

"Next year, we will bounce back to a much better growth rate," he said, adding growth could reach 9 percent by the second half of fiscal 2009/10.

Analysts were sceptical.

Securities firm Macquarie said India's growth outlook faced downside risks due to the global financial crisis and gross domestic product (GDP) growth was seen slowing this fiscal and

the next.

"On our current forecast, GDP growth is poised to fall to a seven-year low of 6.0 percent in 2009/10, from an estimated 7.2 percent in 2008/09," Macquarie analyst Rajeev Malik said in a note released on Monday.

Export-driven outsourcing firms such as Infosys Technologies fell 4.2 percent to 1,180.95 rupees and Wipro shed 8.8 percent to 229.85 rupees on the shockwaves in the global financial sector, which provides a bulk of their revenue.

"There's some more downside left to the market as we have still not reached the bottom," said K.K. Mital, head of portfolio management services at Globe Capital.

Citigroup on Monday announced plans to cut 52,000 jobs globally and HSBC added to the employment gloom on Tuesday, saying it would cut a further 500 staff in Asia, mostly in Hong Kong, due to deteriorating economic conditions.

"We keep hearing bad news from the global financial majors as well as regulators and experts as the global financial and economic crisis escalates," brokerage India Infoline said.

"This is unlikely to go away in a hurry and will cap any sharp movement on the way up," it said.

The broader 50-share NSE index closed down 4.2 percent at 2,683.15.


* Automotive Axles fell 11.1 percent to 112 rupees after it said it would shut down operations for at least a week due to slow demand.

* Binani Industries fell 18.9 percent to 32.45 rupees after it cancelled a plan to swap its shares with Binani Zinc and Binani Cement.


* GVK Power & Infrastructure on 16.1 million shares

* Suzlon Energy on 10.3 million shares

* Unitech on 7.2 million shares

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