Sensex crashes by 746.40 pts during the week
Mumbai, Mar 3: The BSE Sensex shrunk below the psychological levelof 13,000, to settle at 12,886.13 with a major loss by 746.40 pointsfor the week ended March 2, 2007, compared with the previous week'sclosing of 13,632.53.
The market declined amid high volatility. Before the market couldovercome the pre-Budget blues, a disappointing Union Budget 2007-08 andweak Asian markets pushed the market lower.
Similarly, the S&P CNX Nifty index of NSE also lost 212.20points, to finish at 3726.75 compared with the previous week's closingat 3,938.95.
The BSE Mid-Cap shed 198.65 points for the week ended March 2,2007, to settle at 5,466.24 compared with the previous week's closingof 5,664.89. The BSE Small-Cap shed 258.62 points, to close at6,645.81, compared to the previous week's closing at 6,904.43.
On Monday, the day of the Railway Budget, the 30 shares BSE Sensexadvanced 16.99 points (0.12 per cent), to close at 13,649.52.
However, the market experienced volatility and swung 1,000 points,between some of the vital intra-day tops and bottoms of the day. Themarket pulled off an almost incredible rebound after a steep intra-dayfall in mid-afternoon trade. Cement, banking, auto and steel shareswere behind the Sensex's rebound. The rise in cement and steel shareswas due to a cut in rail freight rate on key raw materials in theirmanufacture.
On Tuesday, the 30 shares BSE Sensex lost 170.69 points (1.2 percent), to 13,478.83 on weak Asian markets. Nevertheless, select stocksedged up in a weak market, as investors bet on sector specific Budgetsops.
On Wednesday, the day of the Union Budget, the 30 shares BSESensex tumbled 540.74 points, to settle at 12,938.09 on heavy sellingacross the board. Sensex suffered their biggest fall in eight monthsafter June 13, 2006. Increase in taxes for cement, IT and constructionfirms and weak global markets caused the huge fall on the bourses.
An increase in dividend distribution tax impacted trading on thebourses, and the market tumbled soon after the announcement. Thedividend distribution tax for corporates has been raised to 15 per centfrom 12.5 per cent. No changes have been made in corporate tax.
The 10 per cent surcharge for firms with a taxable income of Rs 1crore, or less, has been removed. The market was expecting abolition of10 per cent surcharge for all corporates.
On the flip side, there is no increase in the securitiestransaction tax (STT), on short-term capital gain tax and on long-termcapital gains tax on sale of shares. Long-term capital gains taxremains zero. The market also expected an increase in STT.
Marketmen also had apprehension of an increase in short-term capital gains tax to 12.5- 15 per cent from 10 per cent.
The Sensex, which had been on a downtrend ever since striking anall-time high (14,723.88) on February 9, 2007, rebounded with greatforce on March 1, 2007. Bargain-hunting for battered index pivotals andshort-covering in the derivatives segment helped to reverse thedowntrend. Most of the gains came in the second half of the day'strading session, triggered by short-covering.
Volatility was also at its best,sub-brokers said.
On Friday, the Sensex gravitated below the psychological level of13,000 after a late sell-off gripped the market. The 30 shares BSESensex lost 273.42 points (2.08 per cent), to settle at 12,886.13, itslowest closing level since late-October 2006. Index heavyweightReliance Industries (RIL) dived and so did IT scrips, cement producers,banks and telecom shares.
Ranbaxy was down 2.54 per cent for the week, to Rs 347.40. Thestock came under pressure as marketmen continued to fret over possibleequity dilution if Ranbaxy acquired Merck's generic drugs business. Thestock has declined even as the company had dismissed media reports thatit was planning an issue of shares in the US, or dilution in stake byfounders to fund the acquisition.
Reliance Industries (RIL) dropped 6.76 per cent to Rs 1317.35.
RIL has a substantial 10.8 per cent weightage in the Sensex. Thecompany had on Friday called a board meeting on 10 March to considerthe payment of interim dividend for FY 2007 (year ending March 31,2007). The company has also set March 22, 2007, as a record date forpaying interim dividend.
The company's announcement comes after the Finance Minister raiseddividend distribution tax to 15 per cent from 12.5 per cent in UnionBudget 2007-08. Paying dividend before the end of this financial yearwill ensure that RIL pays the existing 12.5 per cent tax on dividenddistribution.
IT shares drifted lower. IT major TCS lost 5.24 per cent to Rs1208.45, Infosys shed 6 per cent to Rs 2103.15 and Wipro lost 8.03 percent to Rs 573.20. IT shares witnessed a heavy fall on the Budget afterunits set up in software technology parks were brought under minimumalternate tax (MAT) net. They had staged a rebound the next day underthe reckoning that their earnings will be impacted only to a smallextent following an increase in tax after the Budget, brokers informed.
Banks lost further ground. State Bank of India lost 4.72 per cent to Rs1008.45, HDFC Bank lost 1.02 per cent to Rs 947.70, and ICICI Bank shed6.84 per cent to Rs 845.85. The wholesale price index rose 6.05 percent in the 12 months to February 17 2007, sharply lower than previousweek's annual increase of 6.63 per cent due to a fall in fuel and foodprices. The figure was lower than an expected 6.25 per cent. The BSEBankex lost 312.25 points to 6,447.33 compared to previous week'sclosing at 6,759.58.
A sell-off gripped construction shares after the Budget proposedwithdrawing tax breaks on construction contracts. NagarjunaConstruction slumped 14.02 per cent to Rs 152.05, Gammon India plunged21 per cent to Rs 305.45, IVRCL Infrastructures dropped 9.65 per centto Rs 290.65 and Hindustan Construction dropped 11.02 per cent to Rs101.35. The budget proposed withdrawing ten-year income tax breaks oninfrastructure construction contracts available under section 80 IA,with effect from April, 2000.
Cement makers were hammered after the government announced changesin excise duty based on retail prices. Higher duty will be levied formore expensive varieties of cement. Gujarat Ambuja Cements (down 10.79per cent to Rs 109.60), ACC (down 6.56 per cent to Rs 855.55), Grasim(down 7.60 per cent to Rs 2098.40), UltraTech Cement Company (down 2.81per cent to Rs 872) and Shree Cements (down 3.99 per cent to Rs 1190)were the major losers in this sector.
Maruti Udyog flopped 3.40 per cent to Rs 833.95, after the dreamabout the Finance Minister cutting excise duty on cars turned sour.
In the previous Budget, excise duty was cut to 16 per cent from 24 per cent on small cars.
Cigarette major ITC edged up by 0.27 per cent to Rs 166.55.
Cigarette firms are seen passing on a 5 per cent hike in exciseduty the Budget proposed on cigarettes. The worst fears of the marketwere that cigarettes will be brought under value added tax with 12.5per cent VAT, spawning concerns that higher tax may lead to a shift intobacco consumption, to low-end products such as bidis and chewingtobacco.
Further, the complete exemption of excise duty on all instant foodmixes and biscuits, whose retail price does not exceed Rs 50 a kilo hasalso turned out to be a boon for ITC. Besides being the top cigarettemaker, ITC also makes biscuits and ready-to-eat food.
Relief from excise duty for biscuits and ready-to-eat foods augurswell for the company. The Budget also proposed a cut in duty on foodprocessing machinery to 5 per cent.
Gas transporter, Gujarat Gas Company, ended flat at Rs 1301.01.
The company said on February 23 its net profit jumped 67 per centto Rs 18.23 crore (Rs 10.90 crore). Net sales for the same quartersurged 46.5 per cent to Rs 234.49 crore (Rs 159.96 crore).
Copper producer Sterlite Industries lost 6.03 per cent to Rs 508.05.
Hindustan Zinc lost nearly 2.49 per cent to Rs 604.05, despite the company raising prices by 4.2 per cent February 24 onwards.
Oil exploration major ONGC dropped even as global crude oil held firm. The stock was down 3.64 per cent, to Rs 800.
IFCI topped the volume chart on BSE in almost all of the tradingsessions of the week. The scrip gained 2.16 per cent, to close at Rs28.40.
Four IPOs debuted this week. Indian Bank debuted at Rs 105 on BSEon March 1, 2007, compared to the IPO price of Rs 91. It settled at Rs98.30 on the day of its debut.
In the Budget, the Finance Minister also said that measures willbe taken to allow short-selling by institutional investors, which willhave to be backed by delivery.
With regard to personal income tax, there is some relief to thetaxpayers as the exemption limit went up to Rs 1,10,000 from Rs1,00,000 earlier.
The Securities&Exchange Board of India (SEBI) said onTuesday it had raised the amount of foreign portfolio investment inflowinto India so far in 2007 by Rs 3430.75 crore (USD 773.91 million) dueto capturing of fresh data under the new reporting system, brokersadded.
UNI
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