Sensex crashes by 443 points during the week

Mumbai, Aug 15: The key benchmark indices of bourses ran out of steam after a five-week rally to edge lower, with Sensex crashing by 443 points on the Bombay Stock Exchange (BSE), in the week ended on Friday, Aug 15.

The barometer index BSE Sensex and the S &P CNX Nifty of National Stock Exchange (NSE) settled below their psychological barrier of 15,000 and 4,500 respectively, with the Sensex declining by 443.64 points, or 2.92 pc, at 14,724.18 and the Nifty by 98.80 points, or 2.18 pc, at 4,430.70 in the week.

Poor industrial growth, fall in car sales after 33 months and rebound in crude oil prices from a 3-month low, led the fall.

The markets will remain closed on account of Independence Day. The trading will resume on August 18.

Securities &Exchange Board of India's (Sebi) chairman C B Bhave recently said a review of participatory notes (PNs) was taken but no decision was taken by the board. Market men are expecting Sebi to relax the restrictions on PNs.

Marketmen are anticipating that the Sebi may extend the period for unwinding PNs on underlying derivatives from 18 months to 24 months.

PNs are issued by foreign institutional investors (FIIs) registered in India to unregistered overseas investors. In October 2007, the Sebi had also restricted issuance of PNs in the spot segment to 40 pc of assets under custody and expectation was that it might raise the cap to 45 pc from 40 pc.

The Sebi has also slashed the time period of rights issues to 43 days from current 109 days. It has also changed the pricing rules with issue of shares by companies to qualified institutional buyers (QIB) in light of volatile markets. A QIB issue will now be based on the average share price of the previous two weeks, rather than a choice of an average of two weeks or six months, whichever is higher.

Releasing the Economic Outlook for 2008-09, the Prime Minister's Economic Advisory Council (EAC) on August 13, projected a lower gross domestic product (GDP) growth rate of 7.7 pc during 2008-09 mainly on account of lower agriculture and industrial growth, and adverse fallout of global developments. The EAC had in January this year projected a growth rate 8.5 pc for 2008-09.

Car sales recorded a dip for the first time in 33 months as interest rates, inflationary pressures and hike in fuel prices dented the demand. Passenger car sales declined 1.7 pc to 87,724 units in July 2008 over July 2007, according to a data released by the Society of Indian Automobile Manufacturers.

Relentless monetary tightening by the Reserve Bank of India has finally started to catch up with the industrial growth. A slowdown in the manufacturing sector pulled down the country's industrial growth in June 2008 to 5.4 pc from 8.9 pc a year ago. This is, however, higher than 4.1 pc growth as per revised figures in May 2008. The index of industrial production (IIP) went up 5.2 pc in Q1 this year as compared to 10.3 pc in first quarter last year.

The BSE 30-share Sensex is down at 5,562.81 points, or 27.42 pc, in 2008 so far from its close of 20,286.99 on December 31 last year.

It is 6,482.59 points, or 30.56 pc, away from its all-time high of 21,206.77 struck on January 10.

The BSE Mid-Cap index fell 63.55 points, or 1.07 pc, to 5,823.42 in the week ended yesterday. The BSE Small-Cap index slipped 71.30 points, or 0.99 pc, to 7,110.44 in the week.

Foreign institutional investors (FII) bought shares worth Rs 986.10 crore till August 13. They sold shares worth Rs 26,315.90 in the 2008. Mutual funds sold shares worth Rs 228.60 crore till August 12.

UNI