SUBPRIME MARKET CRISIS/ IMPACT: SECTORAL PERFORMANCE

The US subprime mortgage meltdown has shaved off Rs 2,40,000 crore market capitalisation on the Bombay Stock Exchange in fourteen sessions. The benchmark Sensex has declined by 5.87% (900 points) from its peak of 15795 on July 24, 2007. Currently the Sensex is trading at 14500 levels.

Realty, metal, automobiles, capital goods and bank indices have underperformed the benchmark, declining by over 6% each. Oil and gas, healthcare, IT and consumer durables indices managed to weather the meltdown, declining below 5% each.

The fast moving consumer goods (FMCG) index was the lone survivor -- gaining 3.24%. Tobacco-to-hotels major ITC rose on account of its better-than-expected quarterly results.

Hindustan Unilever fell marginally by 2% as the personal care giant announced a market buyback at Rs 230 a share. The realty sector was hit the hardest -- down over 11%.

The only exceptions were Orbit Corporation, which appreciated by over 50% following a deal with JSW Steel to develop its Mumbai property, and Phoenix Mills, which saw a private equity player picking up 24% stake.

FMCG: Surviving the meltdown

Fast moving consumer good (FMCG) shares survived the subprime blues with the BSE FMCG index gaining over 3%. ITC was the top gainer, appreciating 7.3% on better-than-expected increase in cigarette volumes in the first quarter of 2007-08.

Earlier, the stocks suffered a setback following the VAT rule in Uttar Pradesh and a steep hike in excise duty in the Budget.

The other gainers were Colgate-Palmolive, Nestle India, GlaxoSmithKline Consumer and Marico, up between 5% and 6% each. Tata Tea and Britannia Industries , however, ended up in the losing side.

Metal: Win some, lose some

Weakening prices on the London Metal Exchange and corrective price action in ferrous metals saw the BSE metal index drop 12.18%. The index fell by 1,506 points as over 61% stocks came off their highs.

The key losers were Hindalco (-19%), JSW Steel (-15%), National Aluminium (-12%) and Tata Steel (-12%). Hindustan Copper (+25%) and Jai Corp (+70%), however, rose on positive developments in these companies.

Jai Corp was fuelled by stock splits and one for one bonus shares, while Hindustan Copper rose on its proposed gold exploration JV.

Automobiles: Going downhill

Rising interest cost has clipped automobile sales in the current financial year thus far. The BSE auto index was 7.59% down during the period. Of the 22 automobile stocks, only Eicher Motors gave positive returns.

Escorts, Mahindra and Mahindra, Hindustan Motors, TVS Motor, Tata Motors and Force Motors fell more than 10% each.

Bajaj Auto, Hero Honda Motors, Ashok Leyland, LML and Swaraj Mazda declined between 5% and 10%. The sector witnessed a value erosion of Rs 9,400 crore, of which Mahindra & Mahindra and Tata Motors accounted for Rs 3,000 crore each.

Capital goods: The sheen is off

The capital goods index fell 7.26% (999 points) from its all-time closing high of 13,767.31 to 12,768.35. Around 80% scrips lost ground.

Among gainers, Kirloskar Brothers, Crompton Greaves, Thermax, Kalpataru Power Transmission and LMW appreciated between 2% and 11%.

The big losers were Bharat Electronics and Larsen and Toubro (-9% each), Siemens and BHEL (down by over 8% each) and ABB (-5%). AIA Engineering (-17%), Alstom Projects (-14%), Praj Industries (-13.5%) and Sulzon Energy (-13%) declined by over 10% each.

Bankex: Liquidity blues

The BSE Bankex lost 6.97% or 582.74 points following the recent hike in cash reserve ratio (CRR) to suck out liquidity. Of the 39 listed public and private sector banks, 27 reported a decline in market value.

The remaining 12 banks, including the State Bank of India (+2%) and its associates banks - State Bank of Mysore (+9%), State Bank of Travancore (+15%) and State Bank of Bikaner and Jaipur (+16%), rose on account of their proposals for follow-on public issues. Punjab National Bank, ICICI Bank, Allahabad Bank and HDFC Bank lost over 10% each.

IT: ECB curbs save the day

The new ECB norms on foreign borrowings arrested the value erosion of software services firms. The BSE IT index was least affected, fell 3.81% or 189 points.

Earlier, the rupee appreciation saw all frontline and second-rung stocks losing around 15-20% each from their peak levels in February 2007.

Educomp Solutions and Mphasis appreciated over 10% each, while the big four -- Satyam Computer, Wipro, TCS and Infosys Technologies -- declined between 2% and 7% each. The sector witnessed a value erosion of Rs 21,720 crore with the top four accounting for Rs 10,325 crore

Realty: On a weak foundation

The realty index sank over 13% with seven of the ten stocks seeing massive erosion in their market value. Realty stocks traded on the BSE lost Rs 24,700 crore in market value with the top two: DLF (-Rs 12,250 crore) and Unitech (-Rs 6,206 crore) bearing the brunt.

Indiabulls Real Estate (-20.4%), Parsvanath Developers (-14.6%) and Sobha Developers (-12.5%) were the other major losers.

Orbit Corporation, however, appreciated by 50% on account of its tie-up with JSW Steel to develop a property in Mumbai and the huge profit on sale of land to JSW Steel.

Cement: Pricing curbs hurt

The BS Cement Index fell 7.83% with ACC and Shree Cement being the major losers, down by over 10% each.

The decline in market value was attributed to the notice from the Monopolies and Restrictive Trade Practices Commission on price cartelisation.

The price restrictive policy by the government hurt the industry in the June 2007 quarter with profit growth rate falling below 50% from over 100% in the previous three quarters. The stocks of Andhra Cement, UltraTech, Birla Corporation, India Cements, Ambjua Cement, and Madras Cement declined by over 5% each.

Power: Transmitting gains

The BS Power Index has appreciated by 2.5% compared with the 5.03% fall in the Sensex. Jaiprakash Hydro-Power (+22%), Torrent Power (+17%), NTPC (+5.60%), Gujarat Industries Power (+4.77%) and Tata Power (+4%) were the major gainers.

Tata Power, NTPC and Torrent power are expanding their base through a joint venture. Reliance Energy, despite bagging the Sasan power project, was down 3.48%.

Source : Business Standard