Sensex snaps 7-day slide, banks recoup

September 18th, 2008 - 9:44 pm ICT by ANI  

P. Chidambaram

Mumbai/New Delhi, Sept 18 (ANI): The Bombay Stock Exchange (BSE) Sensex rebounded from sharp early losses on Thursday and snapped a seven-day losing streak, as domestic funds stepped in to pick bargains with Finance Minister P. Chidambaram ruling out negative impact of Lehman bankruptcy but the outlook remained shaky on deepening global financial woes.

Addressing reporters after a cabinet meeting chaired by Prime Minister Dr. Manmohan Singh in New Delhi , Chidambaram said while the government was closely watching the global financial markets, the Indian banking system remained strong.

He specifically spoke about AIG’’s life and non-life insurance businesses in India in a 26:74 ratio with the Tatas and said there was no cause for worry - an opinion shared by the Insurance Regulatory and Development Authority (IRDA).

The Finance Minister also said public sector banks have virtually no exposure to the debt of Lehman Brothers, which filed for bankruptcy in the United States this week.

He admitted that there could be some credit squeeze because of the global turmoil, but said this issue, too would be addressed.

Public sector banks have virtually no exposure to either Lehman Brothers or any other bank that may have failed. ICICI bank has some exposure but they have disclosed it. So our banking system is reasonably insulated form what’’s happening in the rest of the world. However, if there is a credit crunch in the rest of the world it will to some extent impact credit available in the Indian market and Reserve Bank of India (RBI) on Tuesday took some steps to provide liquidity to the banks, said Chidambaram.

His statement resulted in the banking index of the BSE gain over 100 points or 1.52 per cent on Thursday after being down more than five per cent in the early session.

ICICI Bank, India ‘’s second-largest lender, recouped 2.8 per cent to 575.85 rupees after a top official said the bank’’s exposure to foreign markets were small and the bank would post healthy profits.

The stock had tumbled 14 per cent over the previous three sessions on concerns its exposure to the credit turmoil could erode earnings. On Tuesday, the bank said it had exposure to 81 million dollar of Lehman senior bonds.

Domestic fund buying helped lift top listed firm Reliance Industries 3.2 per cent to 1,932.85 rupees, its highest close in a week. The stock, which has the heaviest weight in the main index, had lost 12 per cent in the previous seven sessions.

Leading lender State Bank of India (SBI) rose 2.1 per cent to 1,561.35 rupees and the bank index gained 2.7 per cent.

The 30-share benchmark index ended up 0.4 per cent, or 52.70 points, at 13,315.60, its first rise since September 8.

Still, investors were not convinced they had seen the worst of the global financial turmoil and the BSE index, which has lost more than 34 per cent so far this year, has bottomed out. half of the index components ended down.

The problem is more of the global things that are happening especially in USA . AIG is in a crunch; Lehman Brothers are in a problem. More names are to be announced even in UB seems to be going to declare some problem. So looking at the whole global picture even countries like Japan , Russia , China , all are facing some problems. So the way things are picking up, the dollar is becoming stronger against rupee which is having an adverse effect in Indian stock market, said Siddharth Kunwawalla, market analyst.

The seismic shift on Wall Street this week has triggered a flight of foreign funds from Indian shares. Withdrawals in September have reached 1.3 billion dollar, taking the outflow to 8.7 billion dollar in 2008. (ANI)

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