The Hindu Business Line : Satyam fiasco brings back the bears

The first full-week trading in New Year 2009 witnessed heavy selling pressure in the Sensex, following gains made earlier in the week. The benchmark index Sensex started the week on a positive note by crossing the psychological level of 10000 on Monday.

However, the trigger for Sensex tumbling down was the letter written by Mr B. Ramalinga Raju, former chairman of Satyam Computer Services admitting to an Rs 7,000 crore financial fraud. The Sensex fell by 749 points or nearly 7 percent, conclusively tumbling below the 10000 level on Wednesday. Volatility and selling pressure continued when the markets opened on Friday. This despite other positive news-flow such as inflation coming down to a 10-month low of 5.91 per cent for the week ended December 27. This has been consistently on the decline for the past three months.

Overall, Sensex plummeted 551 points or 5.5 per cent by closing the week in red, at 9406. S&P CNX Nifty is down by 173 points or 5.6 per cent at 2873. Almost entire BSE Sectoral Indices are in red, with BSE Realty being the top loser by plummeting 24.6 per cent. Profit taking in major realty stocks such DLF and Indiabulls Real Estate pulled the stocks down by 27 and 24 per cent respectively during the week.

The BSE Consumer Durables and the BSE TECk lost more then 9 per cent. The BSE Capital Goods and OIL&GAS indices slipped 8 and 7 per cent respectively. An average of 6.5 per cent loss was witnessed in BSE Power, IT and Metal indices. Furthermore, the BSE PSU and Bankex indices am experienced 5 per cent decline while the Health Care index fell by 4 per cent. There were no major changes in BSE FMCG and Auto indices compared to last week.

The Satyam debacle was the cynosure of every investor’s eyes. The fourth-largest Indian IT company clearly took the market down with it. Following the announcement of Satyam CEO’s resignation and admitting to the company’s hugely inflated balance sheet, the scrip fell by 78 per cent on Wednesday. Trading in the company’s American depository receipts was halted on January 7, which is listed in New York Stock Exchange. Selling pressure continued also on Friday and the stock slumped 40 per cent, with extra-ordinary volume on both the trading sessions. On the other hand, peer IT companies such as Infosys and TCS surged 5.7 and 7.7 per cent respectively during the week. There was an increase in volume traded in these stocks.

Axis Bank announced its third Quarter results on Friday. It reported a net profit of 63 per cent at Rs 501 crore for the December quarter last year. The bank has posted a net profit of over 60 per cent for the last six quarters in a row. However, the stock was beaten down by 7 per cent on Friday and closed the week at Rs 486.

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