Monday April 2, 03:30 PM
The RBI stunner! |
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By Equitymaster.com
Bears seemed to have kept the worst for the last as markets plunged deeper into the red during the final hour of trade with banking and auto heavyweights bearing the maximum brunt. Such was the pessimism prevailing on the bourses that only one stock on the Nifty managed to close above break-even. The mood was equally depressing amongst the broader indices. Sugar stocks however, provided the only silver lining.
The BSE Sensex ended at 12,455 (down 617 points) while the NSE Nifty ended at 3,634 (down 188 points). The rupee was trading at 43.31 to the dollar.
Today's carnage had the words 'Repo' and 'CRR' written all over it. With the RBI once again wielding those dreaded tools, markets opened the day and the week on a rather subdued note with the 'Sensex' losing close to 400 points inside the first hour itself. Selling pressure was seen across the board with weakness registered in major sectoral indices. Losses in the BSE Capital goods index were propelled by L&T (down 6%) and BHEL (down 5%). BSE IT index registered a decline with weakness in Wipro (down 8%), Satyam (down 5%) and Infosys (down 5%). RIL (down 4%) and ONGC (down 6%) dragged the BSE Oil and gas indices down. Asian markets ended the day's proceedings on a weak note, however European markets have opened on a firm note.
The RBI on Friday raised the cash reserve ratio (CRR) for the banking sector by 50 basis points to 6.5% (to be made effective in two tranches on April 14 and April 28, 2007) and the 'repo' rate from 7.5% to 7.75%. With these in place, the funds available to the banking sector will be reduced further by approximately Rs 155 bn. Though, the recent spate of interest rate hikes since December 2006, have slowed the credit growth, the same has been higher than the Central bank's targets. Credit growth has been slower at 29.5% YoY at the end of February 2007 as against 32.7% YoY a year ago. Also, deposits have grown by 24.8% as against 18% a year ago. The PLR hikes exercised by banks are expected to hurt the productive sections of the economy. All the banking stocks ended in the red. Corporation bank (down 11%), OBC and PNB (both down 10%) were amongst the key losers in the days trade. ICICI Bank (ICBK.BO, news) and SBI also ended weak (down 6%).
As per a leading business daily, Reliance (RELI.BO, news) Industries (RIL) and Gujarat State Petronet (GSPL) have signed a gas transportation agreement to transport 11 MSCMD of natural gas from Bharuch to the company's refinery and petrochemical complex in Jamnagar. According to the deal, RIL may increase the volumes of gas up to 14 MSCMD. The transportation of gas, which is likely to start from the 2QFY08 post-production from RIL's KG basin, will use the existing pipeline of GSPL. The agreement is valid for a period of 15 years. The arrangement is likely to boost the volumes for the GSPL and consequently the profitability. RIL is expected to leverage the current infrastructure of GSPL to transport the gas from KG basin. This will help Reliance to monetise its gas kinds in a much better manner, as the coal parity prices of gas are higher in the state of Gujarat. The stock of Reliance Industries ended the days trade on a weak note (down 4%). The stock of GSPL ended firm (1%).
According to a leading business daily, India's second largest motorcycle manufacturer, Bajaj Auto (BJAT.BO, news) , announced its sales figures for the month of March 2007. The company has recorded a slump in its overall sales as the number of units sold registered a 9% YoY decline. The dismal performance in the sales of two wheelers (especially motorcycles) has hurt the company's performance as the sales in this segment registered a negative growth of 10%. However, its total sales for FY07 are up 19% YoY (the company sold 2.7 m units during the full year). Bajaj Auto has set itself a sales target of 3 m units for FY08, a growth of 10% YoY. The rise in interest rates and a consequent impact on two-wheeler demand can however, hurt this growth in the current fiscal. Automobile stocks ended in the negative territory with Tata Motors, M&M and Maruti (down 9% each). Hero Honda (HROH.BO, news) (down 7%) and Bajaj Auto (down 6%) were the losers in the two-wheeler segment.
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