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Sell-off Continues; India's Sensex Down 1.7%

Erasing mid-session gains, the Indian market fell sharply for a second day in a row on Friday, weighed by continued selling by foreign funds amid inflation worries and a mixed bag of corporate earnings.

The benchmark BSE Sensex recovered its early loss today when it shot up by over 600 points from the day's low in the afternoon on emergence of fresh buying in battered heavyweight shares. However, the recovery proved short-lived and the benchmark faltered again late in the session before ending down a whopping 322 points or 1.68% at 18,860. The 50-share Nifty lost almost 100 points or 1.7% to close at 5.655.

In the 30-share Sensex pack, only 5 stocks ended in positive territory. Tata Power advanced 2.11%, Wipro gained 1.77%, Jindal Steel added 0.31%, Mahindra & Mahindra edged up 0.13% and Hindustan Unilever ended up 0.10%.

Tata Motors, which said its global sales increased by 21% in December, led the decliners with a 4.62% loss. Private sector lender HDFC Bank tumbled 4.16%, copper producer Sterlite fell 3.45%, two-wheeler manufacturer Bajaj Auto declined 3%, car maker Maruti Suzuki shed 2.88% and property developer DLF eased 2.30%. Mortgage lender HDFC fell nearly 4% despite posting better-than-expected Q3 earnings on higher loan disbursal.

The broader market also saw weakness and the BSE mid-cap and small-cap indexes lost over a percent each. Declining shares outpaced gainers in the ratio of 2.25:1 on the BSE.

State-run SAIL plunged 6.68% on disappointing Q3 results. Jet Airways tumbled 4% on reports that it will add 49 aircraft over the next five years. Zee Entertainment Enterprises slumped nearly 10% after its board approved a scheme of amalgamation between group companies.

Amara Raja Batteries added a percent on announcing a special dividend. PVR gained 0.88% after it reportedly proposed to invest up to Rs.125 crore through its arm PVR Pictures in FY12 to up its distribution activities and production of Bollywood movies.

State Bank of Bikaner & Jaipur eased 1.43% after the state-owned lender increased its base rate by 25 basis points. Maytas Infra, which has been rechristened IL&FS Engineering and Construction Company, ended down 0.43%. Balaji Telefilms lost a percent after it received board approval to sell three divisions.

Tata Coffee hit the 20% upper circuit limit after it signed a pact with U.S.-based Starbucks Coffee International, Inc., to source and roast coffee beans. Kansai Nerolac Paints rose 0.67% on divesting its 49% stake in an unlisted subsidiary for a consideration of Rs.25.72 crore. Newspaper publisher Hindustan Media Ventures gained a percent on reporting a 169% rise in quarterly net profit.

In economic news, India's annual rate of inflation based on wholesale prices rose to 8.43% in December on higher food prices versus 7.48% in the previous month and expectations for an 8.35% rise, government data released today showed. However, the price rise was already discounted in the past few sessions.

The current level of food inflation is not acceptable, finance minister Pranab Mukherjee said today, reacting to the December numbers.

In a statement released late evening yesterday, the government said that an increase in agricultural productivity is the only lasting solution to check food price inflation. It announced a slew of anti-inflation measures and set up an inter-ministerial group, under Kaushik Basu, the Chief Economic Advisor to the finance ministry, to build an 'institutional machinery' that can read warning signals and recommend appropriate fiscal and monetary measures to tackle runaway prices in future.

Elsewhere, the other Asian markets closed mostly lower on Friday, oil and copper prices fell and European stocks retreated for a second day, while the euro hit a one-month high against the dollar after data showed German consumer inflation accelerated to its highest level in more than two years.

The Dow futures fluctuated ahead of data on retail sales, industrial production and consumer confidence that might shed more light on the health of the world's largest economy. Late in the evening, the People's Bank of China said it has raised banks' reserve requirement ratio by 50 basis points, effective January 20. It was the seventh such rate hike since 2010.

by RTT Staff Writer

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