Markets reel as Lehman collapse sends Russian markets crashing (Roundup)September 17th, 2008 - 8:48 pm ICT by IANS
Mumbai, Sep 17 (IANS) Indian equities markets continued to reel Wednesday from the effects of the US financial tsunami as the Lehman Bros. collapse led to the biggest crisis in the Russian financial markets in a decade.Trading on the rouble-denominated Micex Stock Exchange was suspended indefinitely at 12:10 p.m. Wednesday for the second consecutive day after its index plunged by 10 percent within an hour into trading after wiping out a 7.6 percent gain at the opening.
Trading on Micex was suspended Tuesday as well after its index fell 17 percent in one day, the biggest drop since the sovereign debt default by the Russian government and currency crash ten years ago.
“Every one knows that the ripple effects of the Lehman collapse will continue to be felt for quite some more time so the mood is so bad that there are simply no genuine buyers in the markets,” said Jagannadham Thunuguntla, equity head of the Delhi-based Nexgen Capitals Ltd.
Nexgen is the securities arm of India’s fourth largest share brokerage firm, the SMC Group.
At the close of trading, the 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) fell to 13,262.90, down 255.90 points or 1.89 percent over its previous close of 13,518.80.
The broader based 50-share S&P Nifty of the NSE also fell to finish at 4,008.25, down 66.65 points or 1.64 percent against its previous close Tuesday at 4,074.90.
The BSE mid-cap index also fell 77.62 points or 1.49 percent to close at 5,139.63 points.
The BSE small cap index fell to close at 6,214.75, down 74.66 points or 1.19 percent over its previous close at 6,289.41.
“The only buyers were bears trying to cover short positions and some institutional bottom fishing,” Thunuguntla said.
The Russian stock market rout Wednesday came even after the Russian finance ministry offered Tuesday $44 billion to the country’s three biggest banks OAO Sberbank, VTB Group and OAO Gazprombank in an attempt to stop the market crash.
The Russian government also injected Tuesday $20 billion into the interbank lending market to contain soaring borrowing rates as credit dried up in the wake of the Lehman Brothers bankruptcy.
The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent Wednesday.
“In December last year, when the Sensex at 21,000 was at its peak, one share of HDIL was selling at Rs.1500. Today you can buy shares of almost all the big realty companies included in the BSE realty index for Rs.1400,” Thunuguntla said.
Housing Development and Infrastructure Ltd (HDIL) is one of the stocks included in the BSE’s realty sectoral index.
The other realty stocks including that of HDIL that could be bought (one each) Wednesday for Rs.1400 are: Ansal Properties & Infrastructure Ltd., DLF Ltd., Indiabulls Real Estate Limited, Omaxe Ltd., Parsvnath Developers Ltd., and Unitech Ltd.
“Lehman Bros had a lot of exposure in realty companies such as DLF and Unitech which is the reason why there are no buyers even when these stocks are selling at 80-85 percent below their peaks,” Thunuguntla said.
Any major recovery in the short term is unlikely as more banks across the world such as Citibank or Bank of New York come under pressure, he said.
“The financial world is today much more interlinked because of third party guarantees and counter guarantees so that when entities such as Lehman collapses the ripple effects can spread very wide and may take a long time to fully play out,” he said.
The Russian market collapse erased any positive cues that could have come from the news that the US central bank had agreed to bail out insurance giant American Insurance Group (AIG), he said.
Sectorally, the realty sector was the worst hit with the BSE realty index losing 4.13 percent Wednesday. Banks, metals and fast moving consumer goods were the other top losers, although all sectors showed losses.
Of the Sensex stocks, only 7 finished in the black.
The top gainers were Tata Motors, up Rs.19.30 or 4.84 percent to Rs.417.70. Oil and Natural Gas Corp finished at Rs.979.35, up Rs.26.65 or 2.80 percent.
Wipro Ltd closed at Rs.399.75, gaining Rs.8.00 or 2.04 percent. ACC Ltd gained Rs.9.85 or 1.69 percent to end at Rs.592.60.
Sterlite Industries was the top loser shedding Rs.38.40 or 8.04 percent to close at Rs.439.30. Ranbaxy Labs, on reports that the Federal Drug Authority of the US had banned 30 of its drugs, fell to Rs.379.10, down Rs.26.80 or 6.60 percent.
ICICI Bank dipped to Rs.560.30, down Rs.31.05 or 5.25 percent. ITC Ltd slid to Rs.184.40, losing Rs.9.85 or 5.07 percent.
The sentiment was clearly bearish with 1740 or 64 percent scrips declining, 886 or 33 percent advancing and 86 or 3 percent remaining unchanged.