Back Public sector stocks lead the plunge
Suresh Krishnamurthy
THREAT of larger increases in interest rates in the US economy, the provider of liquidity to the global economy, fall in stock prices in other Asian markets and rise in oil prices spooked sentiment and triggered a sharp sell-off in the stock markets. The Apex bank in China too had indicated that money supply would be reduced sparking fears of interest rate increases that will cool the Chinese economy's growth. Stocks of public sector undertakings led the plunge on Wednesday that sent stock market indices down by between 2.5 and 3.5 per cent.
The sell-off was spread across stocks of all types of market capitalisation. At NSE, all the major indices Nifty, Nifty Junior, S&P CNX 500 and CNX Midcap 200 shed almost identical losses of about 3.3 to 3.4 per cent. The market capitalisation of BSE 500 Index declined by about Rs 62,900 crore.
Trading volumes in the Mumbai stock exchange rose significantly even as the volumes in NSE did not indicate any such sharp rise. The BSE 500 stocks that accounted for trading volumes of about Rs 2,700 crore on Wednesday attracted trades worth only Rs 2,100 crore on Tuesday. Volumes at NSE, however, remained within the normal range at about Rs 4,700 crore. Stocks that are part of Nifty and Nifty Junior accounted for about Rs 4,400 crore of the traded volumes.
PSU's slump: The BSE Public sector index slumped by 4.5 per cent as 49 out of the 50 stocks in the index registered losses. The index's market capitalisation declined by about Rs 27,000 crore. The lone stock to buck the trend was Balmer Lawrie. The PSU Index accounted for 20 per cent of the total traded volume in the Mumbai stock exchange.
Banking blues: Within public sector undertakings, banks were the most hit as all the 16 stocks, part of BSE's Bankex index, ended in negative territory. Prominent bank stocks to lose value include Canara Bank, Bank of Baroda, Oriental Bank of Commerce and Andhra Bank. Stocks of private sector banks lost less than their public sector counterparts. They were, however, not spared. Stocks such as HDFC Bank, ICICI Bank, UTI Bank and Kotak Mahindra lost more than what indices lost on Wednesday. Any increase in interest rates in the global economy could enhance the risks of deterioration in profitability for banks if loan growth is not sustained.
Metals slide: In tune with the trends in commodity markets, stocks of metal companies suffered losses. Metal stocks had been marked down in other Asian markets as well as in Australia as prices in metal exchanges declined to digest the threat of a dear money policy. Major losers were National Aluminium, Saw Pipes, Sterlite Industries, Jindal Vijayanagar and Essar Steel.
Prominent losers: Apart from PSU's, banking and metal stocks, prominent losers for the day include stocks such as Balaji Telefilms, JK Paper, Sonata Software, Forbes Gokak, AstraZeneca Pharma and Havell's India. These stocks lost more than 6 per cent.
Prominent gainers: Only 8 out of the BSE 100 stocks recorded gains. These eight stocks, however, gained less than a per cent. In the case of BSE 500 stocks, only 33 stocks registered gains. Prominent among them were Swaraj Mazda, Himachal Futuristic, Jindal Polyester, Kirloskar Oil Engines and Shriram Transport. There is an open offer that is now open for tendering in the case of Swaraj Mazda. Shriram Transport announced the approval of issue of shares to ChrysCapital at a price of Rs 35 per share on Wednesday. Jindal Polyester too is now considering the issue of shares on a preferential basis to a German investor.
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