Sensex dips further by 81.08 pts, closes at 14,009

Mumbai, Feb 14: The bulls continued to get a battering for the third consecutive day today as the sensitive index of Bombay Stock Exchange (BSE) plunged by another 81.08 points and closed low at 14,009.90 due to hike in RBI's Cash Reserve Ratio (CRR) and short-covering in derivatives.

In the last three days, the Sensex has crashed by 529 points.

Today among the 30-Sensex pack, 16 declined while the rest advanced.

Banking stocks were impacted the most by the CRR hike. The BSE Bankex was the top loser among the BSE sectoral indices, down by 290.14 points (3.99 per cent), to 6,976.60.

State-run SBI was the top loser, down by 5.86 per cent to Rs 1104, on a volume of 8.31 lakh shares. It has recovered from a low of Rs 1085.55.

ICICI Bank (down by 4.30 per cent to Rs 913) and HDFC Bank (down 5.12 per cent to Rs 1016.90) followed closely on the heels of the SBI debacle.

A higher CRR requirement will deprive banks of lendable resources, sucking out Rs 14000 crore from the system. Banks do not earn any interest on CRR funds kept with the Reserve Bank of India (RBI).

Strong credit growth in a booming Indian economy has pushed up both lending and deposit rates of banks over the past few years.

Recently, private sector ICICI Bank raised its benchmark reference rate on corporate loans and home loans by 100 basis points.

Ahead of the CRR hike, Indian bond yields ended at a 5-1/2-month high on Tuesday after a key central bank official said he was concerned by rising inflation, stoking nervousness that monetary policy may have to tighten further. The 9-year bond yield rose further on to 8.14 per cent in initial trade from Tuesday's close of 7.96 per cent.

At its quarterly policy review on January 31, the RBI had also raised its key short-term rate, the repo rate, by 25 basis points.

The bourses were gripped by extreme volatility as a host of factors outweighed any bullish sentiment, brokers lamented. The 30-shares BSE Sensex lost 81.08 points, at 14,009.90. It had opened lower, at 13,990.41, and plunged to 13,805.36 under intense pressure.

Value-buying, however, propelled the Sensex from the lower level in the late-afternoon session. The BSE Sensex also hit a fresh high of 14,036.61, as buying gradually picked up later.

The BSE BANKEX and AUTO indices crashed by 289.86 and 60.20 points, closing at 6976.88 and 5,479.35 respectively, followed by PSU by 22.77 points and was quoted at 6,119.31 and the SML CAP by 20.33 and closed at 7,067.82.

However, the BSE METAL and OILS and GAS indices surged by 132.49 points and 47.99 points respectively. Both the indices closed high at 8,617.98 points and 6,596.53 points. Similarly, TECH and CD indices rose by 24.92 and 24.58 points respectively. Both the indices finished at 3,782.96 and 3,792.34 points.

Surprisingly, the S&P CNX Nifty index of National Stock Exchange (NSE) was up by 2.55 points, to 4,047.10, due to a higher weightage of Wipro, which sustained strength throughout the day. Before it resumed flat at 4044.90. The Nifty index recorded the day's high at 4,057.35 and a low at 3,965.20 points in intra day trade.

The market-breadth, an indication of the overall health of the market, finished weak, but did not look as poor as it was in the opening session of trade. A weak breadth has been the feature of trading since the last few days, as small-caps and mid-caps were being sold heavily. Just 1073 shares advanced, against 1,490 declining on BSE. Also, 70 scrips remained unchanged. The total turnover on the BSE amounted to Rs 3998 crore.

UNI