CMP delivers a blow

STOCKS REPORT

The new government's Common Minimum Programme (CMP), which was announced on Thursday, failed to enthuse the stock markets today.

The Bombay Stock Exchange's (BSE's) Sensex, an index of 30 shares, gave ground by 237 points in intraday trades to the day's low of 4821.59.

The benchmark index closed at 4,835.39, down 4.41 per cent, 223.16 points, over Thursday's close. The National Stock Exchange's (NSE's) S&P CNX Nifty, too, fell by 77.65 points to close at 1,508.75.

With today's fall in the Sensex and the Nifty, the markets are on a downhill for the fourth straight day. Today alone investors pulled out Rs 51,256 crore from the Sensex basket, with 28 of the index's stocks ending lower.

The market's breadth was negative: there were only 296 advances against 1,387 declines on the BSE. The fall in the equities market has spread to the forex market as well: the rupee ended lower at 45.47/50 per dollar, down for the fifth consecutive day.

Investors gave a thumbs down to the Left-supported government's proposed economic policy. Brokers talked of fears about a slowdown in economic reforms under the new Congress-led government. The coalition government, which needs Left support to stay in the power, released its CMP late on Thursday.

Today's fall was due to broadbased selling. The BSE PSU index was the biggest loser, falling 6.36 per cent, followed by Bankex, down 6.30 per cent. The consumer durables index was down 4.40 per cent.

Techs, too, took a severe tumble. The BSE IT sector index was down 5.41 per cent, while the BSE TECk index fell 4.78 per cent.

The State Bank of India share was the biggest loser in the Sensex basket, falling 8.67 per cent to Rs 484.85, followed by Reliance Energy, down 7.46 per cent to Rs 497.75 and Hero Honda, down 7.38 per cent to Rs 452.20.

The only two gainers in the Sensex were: Zee Telefilms, up 1.38 per cent at Rs 128.90, and Hindalco, up 1.21 per cent at Rs 925.80.

Heavyweights Reliance Industries fell 4.07 per cent to Rs 431.05, ITC was down 3.63 per cent to Rs 882.90 and HLL was down 2.21 per cent to Rs 137.25.

Players dumped power stocks as the CMP called for a review of the Electricity Act, which aimed to reform the loss-making sector. Tata Power was down 7.24 per cent to Rs 274.90 and PSU major Bhel fell 3.90 per cent to Rs 462.80.

Nandan Chakraborty, head (research), Enam Securities,said, "The CMP is very ambiguous and we will have to now look at the monsoons and then the budget for fresh impetus."

Ambareesh Baliga, vice-president, Karvy Stock Broking, said, "The CMP gives no clear indications and the markets will remain rangebound in the near term."

Don Bosco Michael, senior vice-president at Parag Parikh Securities, said, "The fall today can be attributed to the uncertainty in the market over the Electricity Act and the fate of public sector banks. People are also worried on the tax front. With no disinvestment, there might be more corporate taxes, especially with regard to the technology sector. We expect the market to remain in this state of uncertainty until the Budget. There are no buyers in the market."

MTNL was down 7.34 per cent to Rs 111.70, ONGC fell 6.69 per cent to Rs 649.55 and HPCL was down 3.03 per cent to Rs 313.50.

Maruti Udyog was down 7.02 per cent to Rs 404.60 and Tata Motors fell 6 per cent to Rs 386.75. Wipro fell 6.33 per cent to Rs 1,504.50, Satyam Computer was down 4.79 per cent to Rs 305.05 and Infosys Technologies was down 4.63 per cent to Rs 5,056.85.

Trading volume in the cash segment of the market was higher than that on Thursday. Turnover stood at Rs 2323.49 crore on the BSE and at Rs 4,890.88 crore on the NSE in the cash segment.

Brokers fear that the slowdown in the pace of reforms is a cause for concern and most feel that the government may have to give away a lot of subsidies to farmers, which is likely to worsen fiscal deficit.

Market participants indicate that now the government's position on increasing prices of petroleum and its products will be closely watched. The announcement of the budget will be the next major development.