The Hindu Business Line : Carnage continues amid volatile condition

Trading highlights The Sensex is down 13.7 per cent from its all-time high of 12671 points Tata Steel's results aggravated selling pressure in metal stocks Bajaj Auto and SBI also reported uninspired earning numbers

The carnage continued in the markets after a brief early morning recovery. The Sensex was up close to 300 points in early morning trades after the Government clarified that foreign institutional investors will be treated as investors and not as traders. However, the markets continued to remain volatile and lacked direction for the first half of the day.

Bears continued their onslaught towards the end of the trading session after Mr Sitaram Yechury, member of the Communist party, suggested measures should be taken to check volatility in the stock markets. He demanded that tax on long-term capital gains be brought back and the double taxation avoidance treaty with Mauritius be reviewed.

The index is down 13.7 per cent from the record 12,671 points reached on May 11.

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Overseas Investors sold shares worth Rs 424 crore on May 17. The price to earnings multiple of Sensex is at 21 times compared to a multiple of 13 times for Morgan Stanley Capital International Emerging Markets Index.

The reservation on high valuations was egging investors for a long time. Many mutual fund managers had indicated that markets were reaching a peak and many of them had increased their cash levels.

The global metals market too continued to remain volatile. Steel stocks took a pounding. Tata Steel's results only aggravated selling in metal stocks.

A set of unappealing earnings numbers from companies such as Tata Steel, Bajaj Auto and State Bank of India exaggerated the negative sentiment in the market.

Tata Steel and State Bank of India reported lower net profits for the fourth quarter. Tata Steel indicated that it is feeling the pressure of rising input costs as steel prices were stabilizing. Bajaj Auto's earnings fell short of street estimates. J&K Bank slumped 11 per cent after its profit plunged 50 per cent in the fourth quarter.

Even positive news about stocks such as Simplex Concrete and LG Balakrishna Brothers failed to enthuse these stocks. Simplex Concrete has bagged orders worth Rs 2.38 billion from state governments of Orissa and Manipur for constructing building and install water pipelines.

LG Balakrishna enters into an agreement with International Finance Corporation, Washington for $20 million financial package for improving the company's existing facilities and to develop a Greenfield hot forging facility.

Unitech continued its march up even in such a volatile market. Other real estate stocks such as Mahindra Gesco, however, had a steep fall. Mahindra Gesco has been extremely volatile either gaining or losing over 15 per cent during the last few trading sessions. Shoppers Stop was one of the few stocks to hold on. It witnessed a three-fold surge in volumes but price stayed flat.

Sesa Goa rose 2.1 per cent on expectation that it may get 19 per cent more for its iron ore following Posco's purchase of iron ore from Cia Vale do Rio Doce at that premium this year.

Precision Containers, EID Parry, Indoco Remedies, Tube Investments India, Ballarpur Industries, IFGL Refractory, Indo Rama Textiles and Assam Company were select few gainers in a market bathed in red.