RBI looks for a quick exit with 75-bps hike in CRR
Economic Times, January 30, 2010, Page 1
Urges Govt To Return To Fiscal Consolidation
Team ET MUMBAI
DUVVURI Subbarao on Friday sent out an unequivocal call for help to the government, likening his dilemma of exiting from an expansionary monetary policy to that of Pandava warrior Abhimanyu in the Mahabharata war.
In an uncharacteristically strong message, the Reserve Bank of India (RBI) governor told the government that it should help prevent a monetary policy trap by returning to the path of fiscal consolidation as the central bank began to hasten its exit with a 75-basis-point increase in banks’ cash reserve ratio (CRR), or the portion of deposits they must keep with RBI.
He kept interest rates at record lows and raised the economic growth and inflation forecast for the current fiscal year as business sentiment improves, industrial recovery gains momentum and the services sector grows with improved financing and easing global markets. Economic expansion is inflating commodity and asset prices too.
Abhimanyu, the star-crossed son of Arjuna, penetrated the labyrinthine ‘Chakravyuh’ erected by the Kauravas, but lost his life not knowing how to get out. Arjuna, the only other warrior capable of breaching the formation as well as escaping from it, could not come to his son’s aid as he was distracted fighting another battle.
“This time around, the policy decision was much more complex and challenging than in the last one-and-a-half years. Getting out of an expansionary policy is much more difficult than getting into it. I was telling the banks this morning it is like a Chakravyuh in Mahabharata—you know how to get in but not many people know how to get out,” Mr Subbarao told reporters after the quarterly monetary policy review.
The RBI governor is attempting a deft exit from the ultra-loose monetary policy that he walked into to avoid a serious economic crisis after the bankruptcy of Lehman Brothers in 2008. While the measures have mostly paid dividends, their sudden withdrawal could act as a drag on the improving growth rate, something which neither the political nor the business class wants to see.
As RBI attempts to contain inflation perceptions to pre-crisis levels of 4-4.5% and the medium-term objective of 3%, its objective could be frustrated by a large fiscal deficit, Mr Subbarao said in his policy statement.
“As the recovery gains momentum, it is important that there is co-ordination in the fiscal and monetary exits. The reversal of monetary accommodation cannot be effective unless there is also a rollback of government borrowing,” he observed.
SPRINGING A SURPRISE
What does the CRR hike mean?
While a 50-bps hike was factored in, RBI has surprised with a 75-bps hike. It appears to have gone in for the kill rather than take half measures.
Will the hike push up interest rates?
Unlikely in the short term, as banks are not finding enough takers for surplus funds. Home loan is the only segment showing decent growth, but competition may keep rates low. Govt borrowing targets in Budget will determine long-term rates.
What will this mean for banks?
Banks’ profits will come under pressure & their spreads will be narrowed by 7-10 bps. An increase in bond yields will also hit treasury profits.
Will inflation come down?
RBI expects prices to go up further before they start coming down in July. If the government does not overspend and there is a normal monsoon, prices are expected to fall in Q2 of FY11.
Rs76,974 cr Surplus liquidity since early Jan
Rs 36,000 cr
Liquidity to be sucked by CRR hike
Rs 2,21,369 cr Deposits banks need to raise in Q4’10 to meet 17% growth forecast
Rs 1,98,830 cr
Loans banks need to extend in Q4'10 to meet 16% growth forecast
Rs 7,000 cr Unfinished govt bond auction for the year
7.5%
Revised growth target for 2009-10
8.5% Revised inflation target for FY10
Monday, February 1, 2010
RBI looks for a quick exit with 75-bps hike in CRR
FDI & FII inflows to cross $50 b:Anand Sharma
FDI & FII inflows to cross $50 b:Anand Sharma
Economic Times, January 30, 2010, Page 4
Sudeshna Sen DAVOS
FDI into India is looking set to be more than $25 billion, and FII inbound flows should be more than $25 billion, estimates commerce minister Anand Sharma, though December formal figures aren’t out yet.
Mr Sharma, who had a private session with over 50 foreign CEOs, told ET that investor sentiment towards India was very positive in the series meetings he has had at Davos.
“The money is already coming in, and investor sentiment is very positive,” he told ET. Mr Sharma invited gathered CEOs to invest in R&D and innovation in geo-technology sector in India, at the same time pointing out that FDI flows work both ways, and Indian companies are now going outbound and investing in other economies and creating jobs globally.
He also defended India’s financial sector reform policies. “We leave the regulation of the financial sector to RBI, and the events of the past two years has shown the wisdom of this approach,” he said.
Selling the India story, Mr Sharma reiterated that the unified FDI policy, currently under discussion will subsume 177 Press Notes and be operational by March 31 to make things easier for foreign investors. In addition, he pointed to the government-industry initiative Invest India will help foreign companies in individual sectors.
Speaking to ET, Mr Sharma said that the biggest concern facing the world today is that the recovery, while it is happening, is very weak in developed markets. “It is universal, but not uniform,” he said. “The worry is that this may affect our trade flows, but confidence in India is very high,” he said. And it’s also why he advocates a cautious, deliberate, and perhaps sector by sector approach to withdrawing economic stimuli. “Not all sectors have recovered, and these sectors need time both globally and in India, we should look at a deliberate and cautious approach.” India, he adds, has already discussed its trade imbalance with China, and he has received assurance from the Chinese government that this will be tackled. While at Davos, Mr Sharma will meet up with 23 other ministers for a mini-ministerial on the Doha WTO round, what he calls an informal meeting to take stock. “We will see where the negotiators stand now, and discuss things at an informal level,” he said.
Economic Times, January 30, 2010, Page 4
Sudeshna Sen DAVOS
FDI into India is looking set to be more than $25 billion, and FII inbound flows should be more than $25 billion, estimates commerce minister Anand Sharma, though December formal figures aren’t out yet.
Mr Sharma, who had a private session with over 50 foreign CEOs, told ET that investor sentiment towards India was very positive in the series meetings he has had at Davos.
“The money is already coming in, and investor sentiment is very positive,” he told ET. Mr Sharma invited gathered CEOs to invest in R&D and innovation in geo-technology sector in India, at the same time pointing out that FDI flows work both ways, and Indian companies are now going outbound and investing in other economies and creating jobs globally.
He also defended India’s financial sector reform policies. “We leave the regulation of the financial sector to RBI, and the events of the past two years has shown the wisdom of this approach,” he said.
Selling the India story, Mr Sharma reiterated that the unified FDI policy, currently under discussion will subsume 177 Press Notes and be operational by March 31 to make things easier for foreign investors. In addition, he pointed to the government-industry initiative Invest India will help foreign companies in individual sectors.
Speaking to ET, Mr Sharma said that the biggest concern facing the world today is that the recovery, while it is happening, is very weak in developed markets. “It is universal, but not uniform,” he said. “The worry is that this may affect our trade flows, but confidence in India is very high,” he said. And it’s also why he advocates a cautious, deliberate, and perhaps sector by sector approach to withdrawing economic stimuli. “Not all sectors have recovered, and these sectors need time both globally and in India, we should look at a deliberate and cautious approach.” India, he adds, has already discussed its trade imbalance with China, and he has received assurance from the Chinese government that this will be tackled. While at Davos, Mr Sharma will meet up with 23 other ministers for a mini-ministerial on the Doha WTO round, what he calls an informal meeting to take stock. “We will see where the negotiators stand now, and discuss things at an informal level,” he said.
GMR Infra Q3 net profit plunges 85%
GMR Infra Q3 net profit plunges 85%
Economic Times, January 30, 2010, Page 13
PTI MUMBAI
GMR Infrastructure on Friday posted nearly 85% decline in consolidated net profit at Rs 9.2 crore for the third quarter ended December 2009.
The company had a consolidated net profit (after tax and minority interest & share of profit) of Rs 61.29 crore in the October-December quarter last financial year, GMR Infra said in a filing to the Bombay Stock Exchange (BSE).
However, the company’s consolidated net sales rose to Rs 1,066.72 crore during the third quarter of current fiscal from Rs 958.90 crore of the corresponding period a year earlier.
“In this quarter we have put in place catalysts that drives across sectors in time to come,” GMR Infrastructure Group chairman GM Rao said. GMR Infra is a Bangalore-based infrastructure major with interests in airports, energy and highways.
Economic Times, January 30, 2010, Page 13
PTI MUMBAI
GMR Infrastructure on Friday posted nearly 85% decline in consolidated net profit at Rs 9.2 crore for the third quarter ended December 2009.
The company had a consolidated net profit (after tax and minority interest & share of profit) of Rs 61.29 crore in the October-December quarter last financial year, GMR Infra said in a filing to the Bombay Stock Exchange (BSE).
However, the company’s consolidated net sales rose to Rs 1,066.72 crore during the third quarter of current fiscal from Rs 958.90 crore of the corresponding period a year earlier.
“In this quarter we have put in place catalysts that drives across sectors in time to come,” GMR Infrastructure Group chairman GM Rao said. GMR Infra is a Bangalore-based infrastructure major with interests in airports, energy and highways.
Your home, car loan rates won’t rise till Mar
Your home, car loan rates won’t rise till Mar
Economic Times, January 30, 2010, Page 14
But Corporates Who Borrow Short-Term Money At Sub-PLR Rates May Have To Cough Up More, Feel Top Bankers
Our Bureau MUMBAI
COMMERCIAL banks are unlikely to raise their prime lending rates — offered to the best customers — or deposits rates at least till the end of March. However, large corporates borrowing short-term money at sub-PLR rates may have to cough up more. This was indicated by CEOs of several commercial banks soon after RBI announced a 75-basis point (bp) hike in the cash reserve ratio, the proportion of deposits that banks have to park with RBI. However, car loan rates are unlikely to rise due to increased competition among banks in this segment.
The hike in CRR to 5.75% from 5% in two stages will suck out Rs 36,000 crore from the banking system.
“Despite the CRR hike, there is ample liquidity and thus in the near term rates will not rise,” said AC Mahajan, CMD of Canara Bank. “However,” said DL Rawal, CMD of Dena Bank, “rates will firm up only after March if credit shows signs of revival.” Banks have been parking Rs 75,000-85,000 crore with RBI at 3.5% under the reverse-repo window.
In the light of the CRR hike, CEOs feel that their net interest margins — the spreads between cost of liabilities and yield on advances — could shrink between 7 and 10 bps (a bp is .01%). That is because the cash parked by banks with RBI will not earn any interest, which, in turn, impacts NIMs. A senior SBI official told ET that a CRR hike will translate into an additional outgo of Rs 6,000 crore for the bank, but will have a marginal impact on its NIM. In the December quarter, SBI had surplus liquidity of Rs 75,000 crore.
For Punjab National Bank, the CRR hike will absorb around Rs 1,800 crore and shrink its NIM by 10 bps while for HDFC Bank Rs 1,500 crore will be impounded and NIM will narrow by 7-8 bps. Similarly, the respective figures for Union Bank of India are Rs 1,200 crore and 7-8 bps and for Canara Bank, Rs 1,600 crore and 7-8 bps.
Meanwhile, car loan customers are unlikely to be impacted by the CRR hike due to increased competition in the market. ICICI Bank had brought down its interest rates on car loans early this month. Responding to this, larger players in the car loan market such as HDFC Bank, Axis Bank and Kotak Mahindra also bought down car loan rates.
“The hike in CRR has to be adjusted and the impact will have to be passed on to customers. Hence, the sub-PLR advances would be impacted and reduce over a period of time,” said MV Nair, CMD of Union Bank of India and chairman of Indian Banks Association.
According to TY Prabhu, CMD of Oriental Bank of Commerce, short-term rates for corporates may go up but again this will depend on the surplus liquidity that each bank has with them. Large banks have surplus liquidity in the region of Rs 8,000 crore to Rs 10,000 crore.
“With the hike in CRR, banks will lend more to corporates instead of parking funds with mutual funds. The CRR hike will have little impact on margins but then loan growth will make up for it,” said Romesh Sobti, MD & CEO of IndusInd Bank. Meanwhile, Dhanlaxmi Bank MD & CEO Amitabh Chaturvedi said: “There is unlikely to be any immediate impact. There may not be an increase in both loans and deposit rates. Margins are unlikely to be impacted as there is enough money in the system.”
Economic Times, January 30, 2010, Page 14
But Corporates Who Borrow Short-Term Money At Sub-PLR Rates May Have To Cough Up More, Feel Top Bankers
Our Bureau MUMBAI
COMMERCIAL banks are unlikely to raise their prime lending rates — offered to the best customers — or deposits rates at least till the end of March. However, large corporates borrowing short-term money at sub-PLR rates may have to cough up more. This was indicated by CEOs of several commercial banks soon after RBI announced a 75-basis point (bp) hike in the cash reserve ratio, the proportion of deposits that banks have to park with RBI. However, car loan rates are unlikely to rise due to increased competition among banks in this segment.
The hike in CRR to 5.75% from 5% in two stages will suck out Rs 36,000 crore from the banking system.
“Despite the CRR hike, there is ample liquidity and thus in the near term rates will not rise,” said AC Mahajan, CMD of Canara Bank. “However,” said DL Rawal, CMD of Dena Bank, “rates will firm up only after March if credit shows signs of revival.” Banks have been parking Rs 75,000-85,000 crore with RBI at 3.5% under the reverse-repo window.
In the light of the CRR hike, CEOs feel that their net interest margins — the spreads between cost of liabilities and yield on advances — could shrink between 7 and 10 bps (a bp is .01%). That is because the cash parked by banks with RBI will not earn any interest, which, in turn, impacts NIMs. A senior SBI official told ET that a CRR hike will translate into an additional outgo of Rs 6,000 crore for the bank, but will have a marginal impact on its NIM. In the December quarter, SBI had surplus liquidity of Rs 75,000 crore.
For Punjab National Bank, the CRR hike will absorb around Rs 1,800 crore and shrink its NIM by 10 bps while for HDFC Bank Rs 1,500 crore will be impounded and NIM will narrow by 7-8 bps. Similarly, the respective figures for Union Bank of India are Rs 1,200 crore and 7-8 bps and for Canara Bank, Rs 1,600 crore and 7-8 bps.
Meanwhile, car loan customers are unlikely to be impacted by the CRR hike due to increased competition in the market. ICICI Bank had brought down its interest rates on car loans early this month. Responding to this, larger players in the car loan market such as HDFC Bank, Axis Bank and Kotak Mahindra also bought down car loan rates.
“The hike in CRR has to be adjusted and the impact will have to be passed on to customers. Hence, the sub-PLR advances would be impacted and reduce over a period of time,” said MV Nair, CMD of Union Bank of India and chairman of Indian Banks Association.
According to TY Prabhu, CMD of Oriental Bank of Commerce, short-term rates for corporates may go up but again this will depend on the surplus liquidity that each bank has with them. Large banks have surplus liquidity in the region of Rs 8,000 crore to Rs 10,000 crore.
“With the hike in CRR, banks will lend more to corporates instead of parking funds with mutual funds. The CRR hike will have little impact on margins but then loan growth will make up for it,” said Romesh Sobti, MD & CEO of IndusInd Bank. Meanwhile, Dhanlaxmi Bank MD & CEO Amitabh Chaturvedi said: “There is unlikely to be any immediate impact. There may not be an increase in both loans and deposit rates. Margins are unlikely to be impacted as there is enough money in the system.”
Telenor deal, affordable housing fuel Unitech net
Telenor deal, affordable housing fuel Unitech net
Financial Express, January 31, 2010, Page 1
fe Bureau, New Delhi
Debt restructuring, sell-off of the telecom business to Norway’s Telenor, and focus on affordable housing saw the country’s second largest real estate firm, Unitech Ltd post a jump of 29.37% in its net profit at Rs 176.01 crore during the October-December quarter. The company had posted a net profit of Rs 136.05 crore during the same period of the previous fiscal.
The period saw Unitech’s total income increasing 57.65% at Rs 774.46 crore, against Rs 491.24 crore during the same period of the last financial year.
Earlier in the week, the country’s largest real estate firm DLF Ltd posted a 30% decline in its net profit. Unitech was the most adversely affected real estate firm in the country last year after the global financial meltdown, with its share price crashing to around Rs 20. A company statement said the firm continued to reduce its debt during the quarter and net debt to equity as of December 31, 2009, stood at a healthy level of 0.55. During the first nine months of the current fiscal, the company reduced its debt by Rs 2,854 crore. The total loan outstanding as of December 31, 2009, was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance as on December 31, 2009.
Unitech said it launched over 30 new projects comprising an area of 24.42 million sqft in the first nine months, of which it has already received bookings for over 13.14 million sqft across Gurgaon, Noida, Greater Noida, Chennai, Kolkata, Mumbai, Bhopal, Lucknow and Mohali. The total value of sales bookings till December 2009 was approximately Rs 5,500 crore.
The quarter also saw Unitech emerging a key player in markets like Mumbai and Chennai.
The company received bookings for approximately 1.6 million sq ft in Mumbai and 1.75 million sq ft in Chennai during the first nine months of the current financial year.
Announcing the results, Sanjay Chandra, managing director, Unitech Ltd. said, “While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 31, 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution.”
Financial Express, January 31, 2010, Page 1
fe Bureau, New Delhi
Debt restructuring, sell-off of the telecom business to Norway’s Telenor, and focus on affordable housing saw the country’s second largest real estate firm, Unitech Ltd post a jump of 29.37% in its net profit at Rs 176.01 crore during the October-December quarter. The company had posted a net profit of Rs 136.05 crore during the same period of the previous fiscal.
The period saw Unitech’s total income increasing 57.65% at Rs 774.46 crore, against Rs 491.24 crore during the same period of the last financial year.
Earlier in the week, the country’s largest real estate firm DLF Ltd posted a 30% decline in its net profit. Unitech was the most adversely affected real estate firm in the country last year after the global financial meltdown, with its share price crashing to around Rs 20. A company statement said the firm continued to reduce its debt during the quarter and net debt to equity as of December 31, 2009, stood at a healthy level of 0.55. During the first nine months of the current fiscal, the company reduced its debt by Rs 2,854 crore. The total loan outstanding as of December 31, 2009, was Rs 6,201.70 crore. The company had Rs 611 crore in cash and bank balance as on December 31, 2009.
Unitech said it launched over 30 new projects comprising an area of 24.42 million sqft in the first nine months, of which it has already received bookings for over 13.14 million sqft across Gurgaon, Noida, Greater Noida, Chennai, Kolkata, Mumbai, Bhopal, Lucknow and Mohali. The total value of sales bookings till December 2009 was approximately Rs 5,500 crore.
The quarter also saw Unitech emerging a key player in markets like Mumbai and Chennai.
The company received bookings for approximately 1.6 million sq ft in Mumbai and 1.75 million sq ft in Chennai during the first nine months of the current financial year.
Announcing the results, Sanjay Chandra, managing director, Unitech Ltd. said, “While the company continued to make good progress in terms of project launches and sales bookings, I am particularly gladdened by the progress in construction. During the nine months ended December 31, 2009, the company has ramped up the construction activity at various project sites and it currently has over 60 projects under execution.”
Panel recommends total review of SEZ Act
Panel recommends total review of SEZ Act
Economic Times, February 1, 2010, Page 11
NEW DELHI: The government should ’revisit’ its Special Economic Zone (SEZ) Act ’comprehensively’ and put a ban on transfer of common property and agricultural land for its implementation, a panel has recommended in its report. The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms has noted that concerns of tribals and farmers remained ’totally unattended’ under the Act as there was no cost-benefit analysis for such projects and also due to the absence of an upper limit fixed for land acquisition. The report of the committee, which was set up by the Rural Development Ministry in 2007, was submitted through the ministry to the National Land Reforms Council, headed by Prime Minister Manmohan Singh, sources in the ministry said. The committee noted that the status of ’deemed foreign territory’ to SEZs stands to undermine the institutions set up under (Panchayats (Extension to Scheduled Areas) Act, 1996) as also the rights of the individual citizens.
Economic Times, February 1, 2010, Page 11
NEW DELHI: The government should ’revisit’ its Special Economic Zone (SEZ) Act ’comprehensively’ and put a ban on transfer of common property and agricultural land for its implementation, a panel has recommended in its report. The Committee on State Agrarian Relations and the Unfinished Task in Land Reforms has noted that concerns of tribals and farmers remained ’totally unattended’ under the Act as there was no cost-benefit analysis for such projects and also due to the absence of an upper limit fixed for land acquisition. The report of the committee, which was set up by the Rural Development Ministry in 2007, was submitted through the ministry to the National Land Reforms Council, headed by Prime Minister Manmohan Singh, sources in the ministry said. The committee noted that the status of ’deemed foreign territory’ to SEZs stands to undermine the institutions set up under (Panchayats (Extension to Scheduled Areas) Act, 1996) as also the rights of the individual citizens.
Parsvnath net jumps four fold
Parsvnath net jumps four fold
Business Standard, February 1, 2010, Page 3
Business Standard, February 1, 2010, Page 3
Stimulus withdrawal to hit growth
Stimulus withdrawal to hit growth
Financial Express, February 1, 2010, Page 3
Press Trust of India, New Delhi
In the backdrop of RBI’s advice to the government to withdraw some of the stimulus measures, industry chamber Ficci on Sunday cautioned it will be “dangerous” for economic growth and employment if fiscal incentives given to spur economy were rolled back.
Ficci’s comments come at a time when everyone is counting days for the big day of Budget,likely on February 25.
Ficci secretary-general Amit Mitra said it is a difficult choice between promoting growth and containing fiscal deficit, which is pegged at over 6% for the current fiscal due to duty cuts and increased public expenditure.
Financial Express, February 1, 2010, Page 3
Press Trust of India, New Delhi
In the backdrop of RBI’s advice to the government to withdraw some of the stimulus measures, industry chamber Ficci on Sunday cautioned it will be “dangerous” for economic growth and employment if fiscal incentives given to spur economy were rolled back.
Ficci’s comments come at a time when everyone is counting days for the big day of Budget,likely on February 25.
Ficci secretary-general Amit Mitra said it is a difficult choice between promoting growth and containing fiscal deficit, which is pegged at over 6% for the current fiscal due to duty cuts and increased public expenditure.
Friday, January 22, 2010
Sensex tanks 423 on FII selling
Sensex tanks 423 on FII selling
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
Times of India, January 21, 2010, Page 25
Chinese jitters, MUMBAI
Chinese jitters, fresh weakness in markets around the globe and investors’ disappointment with government's divestment plan pulled the sensex down to its lowest close in over a month.
After opening flat, the index slid through the day and ended at 17,051, down 423 points. It was the biggest single-session loss for the sensex this year and third-biggest in the last six months as foreign funds continued selling.
Going forward, market players expect foreign cues and results from domestic heavyweights like RIL and SBI to dictate market's direction. On Thursday, following the 122-point loss in Dow Jones in US the previous night, the sensex opened flat and as selling picked up through the session, touched an intra-day low at 17,025 and closed just a tad higher.
‘‘Markets were looking weak and were vulnerable for the last few sessions. Today when the market broke the key technical support level at about 5,190 on the Nifty (the index closed at 5,094), it appeared as if there was no tomorrow,'' said Arun Kejriwal, director, KRIS, an investment advisory firm.
Selling was across-the-board with all the 30 sensex stocks closing in the red. On the sectoral front, capital goods, power and realty stocks led the slide and all the BSE sectoral indices ended in the red. Among the sensex stocks, L&T was the top loser. L&T results, which were in line with expectation, with top line lower but margins higher, was not liked by the markets, and hence the selling, which led to a 6.9% loss in the stock to Rs 1,524.
The Chinese government's decision on Wednesday to curb lending to cool down a overheated economy also affected market sentiments, especially among the foreign funds. BSE data showed that FIIs have been net sellers during the last few days and on Thursday they had a net selling figure of Rs 854 crore. The day's losses also made investors poorer by Rs 1.6 lakh crore with BSE's market capitalisation now at Rs 61.8 lakh crore.
With a key technical support level broken, the market could slide further, chartists said. “Going forward, markets will look to foreign markets and results from heavyweight companies for further cues,'' said Kejriwal. Fund managers feel there could be some more slide and most are disappointed with the way government is going ahead with divestment. A fall-out of Thursday's slide was that some of the QIPs which have been lined up, did not generate expected response, giving merchant bankers some tough time.
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