Share prices lack definite direction: Monday Closing Report
Moneylife Digital Team 07 March 2011

The market will continue to react to only specific events, like oil prices

The Indian markets suffered a rough day today following an oil price spike on the worsening crisis in Libya and fears of an interest rate hike that hit rate-sensitive stocks across the board. The global weakness was compounded by worries in the political arena for the ruling United Progressive Front government as it southern ally, the DMK decided to pull out its ministers from the cabinet.

Today's fall on Sensex and Nifty was the second biggest fall since 21 February 2011. Both the Sensex and the Nifty opened with a negative gap at 18,362 and 5,490 respectively. It turned out to be the day's high for the Sensex, whereas for the Nifty the intra-day high was 5,491.

The market was sharply down till around 1pm, after which it tried pulling back and recovered quite a bit of the day's losses. The intra-day low on both the Sensex and the Nifty was 18,059 and 5,408 respectively. In the end the Sensex closed down 264 points at 18,223 and the Nifty ended down 76 points at 5,463. The advance decline ratio on the National Stock Exchange was 400:1319.
In the Sensex stocks, five gained while 25 were in the red. The major gainer was Wipro which gained 1.04%, while Tata Power, Cipla, NTPC and ITC also ended up between 0.03% and 0.96%. Oil price fears dragged auto stocks to the bottom of the 30 stocks. Tata Motors and Maruti Suzuki were the major losers on the benchmark, falling 3.64% and 3.73% respectively.

Among the Nifty stocks, there were nine gainers while 41 stocks fell. Here too Tata Motors was the worst loser (down 4.21%).

All the 13 sectoral indices on the BSE were in the negative. The biggest loser was BSE-Auto, which fell 2.55%. The other major loser was BSE-Capital Goods that lost 2.36%. it is widely expected that the Reserve Bank of India will raise key interest rates by 25 basis points in its monetary policy review on 1st March, as inflation has stayed well above the target. The BSE Bankex was among the bottom five sectoral indices today. Losing 1.60%.

In line with the 1.43% fall in the Sensex, the BSE Midcap and BSE Smallcap also fell 1.41% and 1.43% respectively.

US crude rose to a 30-month high above $106 on Monday as civil unrest worsened in Libya. At home, the pull-out by the DMK could make things more difficult for prime minister Manmohan Singh to push through his agenda and economic reforms. But reports that the DMK would continue to support the government from outside contributed to recovery of the market post-noon. The Sensex rose 164 points from its intra-day low of 18,059, but still closed in the negative.

The sale of equities is finding its way to precious metals. Both gold and silver surpassed all previous records to hit new highs today. While gold surged Rs200 to Rs21,420 per 10 grams on rising seasonal demand, silver rose by Rs1,250 to Rs54,450 per kg on heavy buying by stockists and industrial units.

Dr C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said today that a hike in domestic fuel prices would become "inevitable'' if oil prices remained high. However, he said food inflation would decline from March.

"You see, the impact of the decline in vegetable prices started somewhere in the second week of February. Therefore, even the February numbers may not fully reflect the impact of the decline in vegetable prices. March numbers, I believe will show the result (and) it will come down. One can expect a sharper decline in March,'' he said.

In the Asian markets, the Nikkei 225 fell 1.76%, the Seoul Composite lost 1.22% and the Hang Seng was down 0.41%. The Shanghai Composite was the top gainer up 1.83%, the Jakarta Composite gained 0.53% and the Straits Times was up 0.17%.

Today, FIIs were net sellers of equities worth Rs92.24 crore, while the DIIs were net buyers by Rs45.57crore.

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