Concerns arising from a hike in domestic interest rates, caution ahead of the Bank of Japans policy meeting and worries that the government may raise short-term capital gains tax in the Union Budget 2007-08 pulled down the market today. Banking, cement, auto and telecom stocks were among those that edged lower.
The market-breadth was quite weak. For 1,908 shares that declined on BSE, 707 rose. Just 58 shares were unchanged. Losers outpaced gainers by a ratio of 2.69:1.
The Sensexs provisional closing was 14,249.42, a fall of 153.48 points. The provisional closing for the Nifty was 4,104.20, a drop of 60.35 points. A fall in ONGC weighed on the Nifty. ONGC has a much larger weightage in the Nifty compared to that in the Sensex.
Nifty February futures were at 4,115.55, compared to the spot Nifty closing of 4,104.20.
The BSE clocked a turnover of Rs 3871 crore.
Shares of the state-run SBI today dropped 2.4% to Rs 1103. The State Bank of India (SBI) on Tuesday (20 February 2007) joined some other state-run banks in raising the benchmark prime lending rate (PLR). Interest rates on working capital loans are linked to PLR. Any rise in PLR increases borrowing cost of working capital loans for corporates. ICICI Bank shed 0.7% to Rs 971, while HDFC Bank lost 0.7% to Rs 1025.35.
Housing finance major HDFC lost 2.4% to Rs 1651, on concerns that rising interest rates may impact demand for housing loans.
Oil exploration major, ONGC, dropped 3.5% to Rs 873, following reports that the Directorate General of Hydrocarbons (DGH) had disallowed gas discovery in the Krishna-Godavari basin. ONGC is likely to contest DGH views, reports suggest.
Cement shares edged lower on market talk that the government impose a ban on cement exports in the budget to check cement prices. Grasim lost 3% to Rs 2565, and Gujarat Ambuja Cements shed 2.2% to Rs 129.50.
FMCG major Hindustan Lever (HLL) lost 2.5% to Rs 199.80 amid post-results' volatility. The stock had weakened to Rs 200.70 by 12:04 IST ahead of the results, which hit the market in afternoon trade. HLL had firmed up to a high of Rs 207.85 by 13:43 IST. As many as 26.8 lakh shares changed hands in the counter on BSE. HLLs net profit declined 1.9% in the December 2006 quarter to Rs 511 crore from Rs 521 crore in the December 2005 quarter.
Telecom shares edged lower. Reliance Communications shed 2.3% to Rs 452.10, and Bharti Airtel shed 1.1% to Rs 788.10.
Reliance Industries dropped 0.3% to Rs 1412.85. The stock weakened in the latter part of trading. It rose as much as 1.8%, to a high of Rs 1444.80, by 13:32 IST. This is a new all-time high for the stock. As per reports, global oil major, Chevron Corporation, may assist RIL in developing an exploration block in the fertile Krishna-Godavari (KG) basin.
Auto shares drifted lower. Maruti Udyog lost 2% to Rs 895.20. The stock had surged in the last couple of days after the cut in retail prices of petrol and diesel. While Tata Motors lost 1.6% to Rs 854, Bajaj Auto dropped 1.1% to Rs 2991.
A key near-term trigger for global markets is the Bank of Japans two-day policy meeting ending on Wednesday (21 February 2007). Analysts are divided over whether Japan's central bank will lift rates to a decade-high of 0.5% from 0.25%. Hedge funds, who benefited from low rates in Japan, may resort to selling equities following any rate hike, or a signal of a rate hike.
Meanwhile, there are also concerns in India that the government may raise short-term capital gains tax on sale of shares from the current 10% in the budget.
February 2007 derivatives contracts expire this Thursday (22 February). The rollover in Nifty contracts, till end of Mondays trading, was 36%. The overall rollover in individual stock futures was about 25%. The rollover was strong, at 50 - 60%, in Reliance Petroleum, Satyam Computers, Balrampur Chini Mills and Bajaj Hindustan.
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