Indian Markets nosedive on fears of multiyear high inflation

Fears of further spike in inflation to a multiyear high post today`s fuel price coupled with weak global markets created havoc on the bourses. The market witnessed choppy swings throughout the day. Stocks across the board were hammered brutally with all sectoral indices on BSE suffering losses.

The market had witnessed a short lived recovery in early afternoon trade soon after the Cabinet Committee on Political Affairs (CCPA) approved the long awaited hike in fuel prices.

The 30-share BSE Sensex tumbled 455.99 points or 2.86% at 15,506.57, as per provisional figures. Sensex gained 30.34 points at its high of 15992.90 hit in early trade. It lost 520.22 points at day`s low of 15,442.34, touched in late trade.

The broader based S&P CNX Nifty was down 134 points or 2.84% at 4,581.90 as per provisional figures.

The BSE Mid-Cap index down 2.31% to 6396.31 and BSE Small-Cap index down 2.04% to 7,721.87. Both these indices outperformed Sensex.

In a crucial development, government today agreed to raise its petrol and diesel prices by about 10% in an attempt to curb mounting losses of state-owned refiners thereby stoking inflation and risking a political backlash. After 10 days of debate over the price increase, the Cabinet also agreed to cut the import duty on crude oil to support state run refining and retailing firms.

Customs duty on crude was also reduced to nil from 5%. The duty cuts would amount to Rs 22,660 crore in revenue loss, the Revenue Secretary said.

The market breadth was weak on BSE with 700 shares advancing as compared to 1944 that declined. 75 remained unchanged.

Among the 30-member Sensex pack, 29 declined while India`s largest oil exploration company in terms of market capitalisation ONGC was the lone gainer. The stock surged 5.31% to Rs 887.05 on speculation that it may have to absorb lower subsidy burden after today`s fuel price hike.

The BSE clocked the turnover of Rs 5,551 crore today as compared to Rs 5,252.69 crore on 3 Jun 2008.

India`s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries (RIL) sumped 4.57% to Rs 2296.70.

India`s largest real estate developer in terms of market capitalisation DLF shed 4.7% to Rs 555.10. The company`s net profit rose 536.6% to Rs 2590.28 crore on 388.1% rise in sales to Rs 5532.88 crore in FY 2008 over FY 2007.

Metal stocks declined. Sterlite Industries (down 6.71% to Rs 841.40), Sesa Goa (down 8.83% to Rs 3568.70), National Aluminium Company (down 1.71% to Rs 478.30), Tata Steel (down 5.36% to Rs 815.60), Hindalco Industries (down 3.09% to Rs 178.60), Steel Authority of India (down 1.69% to Rs 153.75), edged lower.

Power stocks declined. Reliance Power (down 7.31% to Rs 202.80), Tata Power Company (down 7.06% to Rs 1,165.85), Reliance Infrstructure (down 4.89% to Rs 1070.10), Powergrid Corporation of India (down 2.97% to Rs 88.30) edged lower.

Realty stocks slumped. Lanco Infratech (down 12.27% to Rs 416.50), Indiabulls Real Estate (down 7.29% to Rs 412.05) and Unitech (down 5.52% to Rs 207.20) edged lower.

State run oil & gas stocks erased early gains to post losses despite fuel price hike. BPCL (down 7.84% to Rs 324.05), Indian Oil Corporation (down 3.61% to Rs 418.20), HPCL (down 2.9% to Rs 241.40) edged lower.

The OMCs have so far reported losses of over Rs 2.25-lakh crore due to the high crude prices and in the absence of revision in the domestic retail prices. They have said they will run out of cash to import crude if the government fails to bail them out.

Auto stocks were subdued post oil price hike announcement. Hero Honda Motors (down 4.26% to Rs 764), Mahindra & Mahindra (down 3.2% to Rs 571.50), Tata Motors (down 4.87% to Rs 542.50), Maruti Suzuki India (down 5.07% to Rs 746.55), and Bajaj Auto (down 4.91% to Rs 551.60) edged lower.

Ambuja Cements (down 5.46% to Rs 87.50), HDFC Bank (down 5.19% to Rs 1,215.95), Bharat Heavy Electricals (down 4.99% to Rs 1471.25), DLF (down 3.85% to Rs 560), edged lower from Sensex pack.

European markets which opened after Indian markets were weak. Key benchmark indices from France, Germany and UK were down by between 1.23% to 1.81%.

Asian markets were trading mixed today, 4 June 2008. Nikkei 225 index Taiwan`s Taiwan Weighted, South Korea`s Seoul Composite and rose between 0.56% to 1.59%.

However, Singapore`s Straits Times, Hang Seng and China`s Shanghai Composite were down by between 0.83% to 1.93%.

US markets declined in volatile session yesterday, 3 June 2008 led by growing speculation that Lehman Brothers will be forced to raise more capital and a drop in oil prices pushed down energy companies. The Dow Jones industrial average declined 100.97 points, or 0.81%, to 12,402.85. The S&P 500 index slipped 8.02 points, or 0.58%, to 1,377.65, while the Nasdaq Composite index was down 11.05 points, or 0.44%, to 2,480.48.

US light crude for July delivery fell 34 cents to $123.97 a barrel today, 4 June 2008, triggered by a rallying dollar as traders awaited U.S. data expected to show rising oil stocks. London Brent crude for July delivery fell 38 cents to $124.20 a barrel.

Meanwhile, mutual funds have reportedly managed to increase their assets under management (AUM) by 5.36% in May 2008, helped by fresh investments in fixed income funds. The collective AUM rose by 30,576.72 crore in May 2008, according to the data released by the Associations of Mutual Fund in India (AMFI).