Market slips after firm start, Ranbaxy tumbles
September 17th, 2008 | by mantrionline |Key benchmark indices opened higher on Wednesday, boosted by the US Federal Reserve’s bailout package for the beleaguered US insurer AIG. The BSE 30-share Sensex was down 147.94 points after a strong opening.
Meanwhile, the US Federal Reserve kept its target for the federal funds rate at 2%.
The US Federal Reserve in a meeting on Tuesday announced an $85 billion rescue plan to help American International Group in exchange for a 79.9% stake. The deal would avoid the biggest corporate bankruptcy ever and follows a government bailout of mortgage lenders Freddie Mac and Fannie Mae earlier this month.
IT pivotals were in demand. However Ranbaxy Laboratories slumped over 8% and ICICI Bank shed over 4%. The market breadth was positive.
At 10:21 IST, the BSE 30-share Sensex was down 147.94 points or 1.11% to 13,369.06. The Sensex opened with a upward gap of 101.94 points at 13,620.74, which is also its day’s high so far. At the day’s low of 13,357.60 hit in early trade, the Sensex lost 161.20 points.
The S&P CNX Nifty lost 38.90 points or 0.95% to 4,036.
The market breadth was positive on BSE with 856 shares advancing as compared to 582 that rose. The total turnover on BSE amounted to Rs 517 crore by 10:30 IST
The Fed said that the strains in financial markets have increased significantly and labour markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending.
Meanwhile, Barclays has agreed to acquire US fourth largest investment banking firm Lehman Brothers’ North American investment banking and capital markets businesses. Barclays said it would acquire trading assets with an estimated value of 40 billion pounds and trading liabilities worth 38 billion pounds. It will also acquire Lehman’s New York headquarters.
Among the 30-member Sensex pack, 18 slipped while the rest gained.
Ranbaxy Laboratories, India’s top drug maker by sales plunged 8.23% to Rs 372.50 and was the top loser from Sensex pack. The stock tumbled on reports the US government has banned more than 30 generic drugs made by the company citing poor quality in two of its Indian factories. The stock was already on a sustained downtrend ever since the Japanese drug maker Daiichi Sankyo’s open offer to acquire an additional 20% stake at Rs 737 a share in the company ended on 4 September 2008.
India’s largest private sector bank in terms of net profit ICICI Bank plunged 4.58% to Rs 564.25 on reports the bank will have to take a hit of $28 million on account of the additional provisioning that ICICI Bank’s UK subsidiary will have to make after Lehman Brothers Holdings, the fourth-largest investment bank filing for bankruptcy.
Sterlite Industries (down 2.62% to Rs 465.20), State Bank of India (down 2.74% to Rs 1542), and ITC (down 3.37% to Rs 187.70), edged lower from the Sensex pack.
India’s largest private sector firm in terms of market capitalization and oil refiner Reliance Industries fell 1.58% to Rs 1898 on 1.60 lakh shares. The stock had hit a 52-week low of Rs 1800 in intra-day trade on Tuesday, 16 September 2008.
IT pivotals surged on fresh buying. India’s second largest software services exporter Infosys surged 3.95% to Rs 1626 and was the top gainer among the Sensex pack.
Wipro (up 1.57% to Rs 397.70), Satyam Computer Services (up 2.71% to Rs 366) and TCS (up 0.20% to Rs 751), gained.
India’s top oil exploration firm by market capitalisation Oil and Natural Gas Corporation (ONGC) gained 2.13% to Rs 973, after the company said it has agreed to give Rocksource ASA, a Norwegian company, 10% participating interest in deep water block in the eastern offshore.
US light crude for October 2008 delivery gained $3.15 to $94.30 a barrel as an $85 billion bailout of American International Group sparked a relief rally on Wall Street.
Asian markets were trading mixed today. Key benchmark indices in China, Hong Kong and Singapore, were down by between 0.57% and 1.62%. However indices in Japan, Taiwan, and South Korea rose by between 0.68% and 2.48%.
US markets rallied on Tuesday on growing optimism that US authorities may finance a rescue of insurer American International Group (AIG). The Dow Jones Industrial Average surged 141.51 points, or 1.30%, to 11,059.02, the Standard & Poor’s 500 Index rose 20.87 points, or 1.75%, to 1,213.57 and the Nasdaq Composite index climbed 22.45 points, or 1.03%, to 2,202.36. The US government announced rescue plan for AIG after trading hours.
Back home, buying in index pivotals coupled with short covering after five straight days of fall helped key benchmark indices erase sharp early losses on Tuesday, 16 September 2008 in highly choppy session. The BSE 30-share Sensex slipped 12.47 points or 0.09% at 13,518.80 and the S&P CNX Nifty rose 2 points or 0.05%, to 4074.90, on that day.
Foreign institutional investors (FIIs) were net equity sellers worth Rs 1303.41 crore while mutual funds bought shares worth Rs 612.36 crore on Tuesday, 16 September 2008, according to provisional data on NSE. FIIs were net buyers of Rs 1053.14 crore in the futures & options segment on that day.
Meanwhile, the Reserve Bank of India (RBI) on late Tuesday stepped in with measures to support the rupee — which has been battered to almost 47 against the dollar — and supply cash in the money market. The move will increase dollar supply and lower banks’ borrowing cost in the overnight call money market. RBI has hiked the maximum interest that banks can pay on NRI deposits by 50 basis points for dollar as well as rupee deposits.
