POST CLOSING COMMENTARY 1-APR-08

Market settles slightly lower in choppy trade; turnover drops

As some arbitrageurs and jobbers stayed away from the market to protest change in tax treatment of the Securities Transaction Tax (STT) that came into force from today,

The change in tax treatment of securities transaction tax (STT) is seen raising cost for arbitrageurs, which in turn may result in fall in arbitrage volumes. STT will now be treated like any other deductible expenditure against business income of the assesses. This is against the earlier practice of 100% rebate for STT paid against the tax liability for the year.

low volumes saw share prices swing wildly on the first day of the new financial year FY 2009 (year ending March 2009). After opening on a firm note, market lost ground by early afternoon trade only to recover in mid-afternoon, led by recovery in index heavyweights Reliance Industries (RIL) and ICICI Bank. The market breadth was strong. 16 shares from the 30-member Sensex pack advanced.

BSE Sensex was down 17.82 points or 0.11% at 15,626.62. Sensex lost 342.59 points at day’s low of 15,301.85 touched in early afternoon trade. Sensex rose 189.61 points at day’s high of 15,834.05 hit in early trade. Sensex oscillated in a band of 532.20 points in volatile trade.

S&P CNX Nifty rose 5.05 points or 0.11% at 4,739.55.

As per provisional data, foreign funds sold shares worth a net Rs 638.86 crore today. Domestic funds sold shares worth a net Rs 289.56 crore.

The market breadth was strong: On BSE 1,722 shares advanced as compared to 924 that declined. 51 shares remained unchanged.

The market sentiment remains edgy as Indian companies are sitting on huge losses on account of the forex derivative transactions they undertook last year. A steep decline in the value of the US dollar against the Japanese Yen and the Swiss Franc has hit Indian corporates which have used these two currencies (Yen and Franc) extensively to swap their rupee denominated debt.

The sharp rise in inflation has also been a cause of concern. Inflation has now risen above the Reserve Bank of India’s caution limit of 5%. India's wholesale price index surged to 13-month to 6.68% in the 12 months to 15 March 2008, surging from the previous week's rise of 5.92%, government data showed on Friday, 28 March 2008.

Finance minister P Chidambaram yesterday, 31 March 2008 announced a slew of measures, in an attempt to rein in commodity prices. The measures include a total ban on non-basmati rice exports, a reduction in import duty on edible oils, allowing states to impose stock limits with traders, and also warning the steel lobby to hold the priceline.

Meanwhile the Reserve Bank of India’s governor in a statement on the same day said that he was ready to tackle unacceptably high inflation, underscoring the seriousness across government quarters on tackling the issue.