Markets pull back on CRR cut; Sensex down 7%

Markets pull back on CRR cut; Sensex down 7%


MUMBAI: Tsunami of financial global crisis hit Indian market on Friday as equities plunged sharply tracking other global markets on renewed fears

of recession in the US and Europe. However a surprise cut in Cash Reserve Ratio by the Reserve Bank of India soothed some worries of liquidity crunch in the Indian market.

Benchmarks fell close to 10 per cent as soon as the market opened and were almost close to trigger lower circuit but bounced back as buying resumed in.

At 10:10 am, Bombay Stock Exchange’s Sensex was at 10,523.58, down 804.78 points or 7.10 per cent. The index hit a low of 10,239.76 in early trade.

National Stock Exchange’s Nifty was at 3,308.30, down 5.84 per cent or 205.35 points. The 50-share index hit an early low of 3198.95.

The Reserve Bank of India on Friday announced a further reduction in cash reserve ratio by 100 basis points, effective Saturday, Oct 11, to 7.50 per cent.

On a review of the evolving liquidity situation in the context of global and domestic developments, it has been decided to reduce the CRR by 150 basis points to 7.50 per cent of net demand and time liabilities with effect from the fortnight beginning Oct 11, instead of the 50 basis points reduction announced on Oct 6, the Indian central bank said in a statement.

IT-bellwether Infosys Technologies second quarter results were in line with market expectations, but lower dollar guidance was disappointing which indicates tough time for the Indian IT industry.

Infosys Technologies standalone net profit for the quarter ended September 2008 was up 10 per cent at Rs 1,390 crore against Rs 1,262 crore in the previous quarter. Net sales rose to Rs 5,066 crore in the second quarter up 12.17 per cent from Rs 4,516 crore a quarter ago.

Infosys has lowered its FY09 revenue growth to 13-15 per cent from 19-21 per cent. Consolidated revenue has been revised down 5 per cent to $4.72-$4.81 billion from $4.97-5.05 billion. EPS is revised from $2.32 per ADR to $2.24 per ADR. The company will not be hiking its offer for proposed Axon stake.

On the data front, inflation and Index of Industrial Production numbers will be announced later today. The wholesale price index is forecast to have risen 11.98 per cent in the 12 months to Sep 27, having posted a rise of 11.99 percent in the previous week.

Industrial output is forecast to grow 6.1 per cent in August from a year earlier, slowing from the previous month, and analysts believe global financial turmoil could further dent expansion in the months ahead.

Among frontline stocks, ICICI Bank (-11.36%), Satyam Computer (-11.22%), Infosys Technologies (-10.71%), Tata Steel (-9.98%) and Reliance Communications (-9.85%) were the worst hit.

None of the stocks in the 30-share index managed to brave the tide.

“None of the steps taken by the US, Europe or the ones like the interest rate cuts on Wednesday by nations across the world seem to be working. The financial markets seem to have fallen in quick sand. It is useless watching the support levels in the indices or stocks as they have no relevance in today’s market. Three month Libor and the overnight rates that banks charge each other are continuously increasing. Unless, you see a drop in these rates, don’t touch equities with a pole. If the Sensex hits a circuit breaker, then of course it is a different thing and stocks could present short term upward potential. Our past targets for Sensex are 9,200 and 2,850 for the Nifty,” said Anagram Stock Broking.

Market breadth was extremely weak with 1099 declines against 131 advances on BSE
 
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