The Hindu Business Line : CRR hike to curb inflation leads to market fall

RBI's decision to increase the interest rates a month before a scheduled review to lower inflation from a near two-year high led to the day's fall in stock markets. Sensitive index, posting its biggest drop in ten months, closed deep in red with a 4.7 per cent intra day loss. The broader index, nifty, followed suit and shed close to 188 points. The advance-decline ratio, reflecting the bearish sentiment was pegged at 1:2.5. Among the sensex pack, however, there were no gainers. Auto, banks and capital goods stocks were among the worst hit during the day's fall.

Buzzing stocks

Despite a falling market, Gujarat State Petronet inched higher after it signed a 15-year agreement with Reliance Industries to transport gas from Bharuch to the latter's refinery at Jamnagar in Gujarat. Another stock that witnessed buying interest was Moser Baer, which after a firm opening rose to touch an intra day high of Rs 309. The stock rose on news that its unit had bought 40 per cent stake in Slovenia-based Solarvalue Proizvodnja d.d. from Solarvalue AG for an undisclosed sum. However, the stock failed to keep the buying interest alive and succumbed to the broad market trend, paring gains.

Among stocks that hit their all-time low during the trading session were Nirma, Gokaldas Exports, Amar Remedies, Kernex Microsystems and Punj Lloyd.

Sector focus

Following the interest rate hike from RBI, banks stocks took a beating on fears of a credit growth slowdown. ICICI Bank lost about 6 per cent while State Bank of India shed 6.3 per cent to close at Rs 930. Among other stocks that lost more than 7 per cent were Oriental Bank of Commerce, Punjab National Bank, Bank of India and Union Bank.

The interest rate hike cast its spell on auto stocks too, which slid on fears of a lacklustre sales growth going forward. Since a significant number of total cars and commercial vehicles sold in India are financed from lenders, the hike in borrowing cost by leading banks could have a negative impact on the revenues of companies in this space. M&M, Maruti Udyog, Tata Motors, Hero Honda, Bajaj Auto and Ashok Leyland were among the losers in this space.

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Share prices of realty stocks too witnessed a downtrend, following the interest rate hike. Indiabulls Real Estate, Sobha Developers and Parsvnath shed close to 7 per cent each, while Unitech and Mahindra Gesco pared about 5 per cent gains each.

Sugar stock, bucking a decline in the broader markets, extended gains for the day. The stocks in this sector rose on expectations that the government's plan to build reserves may help stem a fall in local prices of the commodity. Some of the sugar stocks that moved northwards were Bajaj Hindustan, Shree Renuka Sugar, Oudh Sugar, EID Parry and Balrampur Chini Mills.

Stock-specific action

Bharat Seats chipped in 10 per cent gains during the day on news that its board is likely to consider a bonus and stock split soon.

Lanco Infratech won a bid for three construction projects worth Rs 102 crore in Karnataka and Tamil Nadu. However, the stock tanked 6.6 per cent during the day.

Kirloskar Brothers, despite securing an order worth $10.48 million (approx Rs 47 crore) from the Jamaica's National Water Commission lost about 4 per cent.