Post-Market Commentary, Thursday, October 23, 2008

Auto, metal shares lead 398-point Sensex slide

A strong rebound in mid-afternoon trade on Finance minister P Chidambaram’s comments that the Securities & Exchange Board of India (Sebi) has asked foreign institutional investors (FIIs) to reverse short positions on borrowed shares, proved short-lived. Auto and metal stocks led 398.20 points or 3.92% fall in the BSE Sensex, which ended below the 10,000 mark. Relaxation of the overseas borrowing norms for corporates and softening inflation failed to lift the gloom.
Chidambaram told a television channel that the reversal of FIIs' short postions on borrowed shares, is likely to take place over the next few days. Early this week, Sebi had disapproved overseas lending of shares by foreign funds after data showed that FIIs had lent equities worth Rs 348 crore to overseas entities for the purpose of short selling, during 10 October-14 October 2008. The data had later showed that their FIIs had lent equities worth Rs 1000 crore between 10 October-17 October 2008.
Meanwhile, the liberal overseas borrowing norms will help Indian firms with good credit rating in raising overseas funds once the global credit market crises eases. According to the new rules notified by the Reserve Bank of India, external commercial borrowings up to $500 million per borrower per financial year would be permitted for rupee expenditure or foreign currency expenditure for permissible end uses under the automatic route.
Stocks fell in Europe as bearish updates from engineering group ABB and auto group Daimler added to worries about the global economy that sent banks and commodity shares sharply lower. Key benchmark indices in France, UK and Germany fell by between 2.25% to 3.94%.
Asia markets, which had tumbled earlier in the day on fears of a severe global downturn, however, cut steep intraday losses on news the Federal Deposit Insurance Corp Chairman Sheila Bair is expected to suggest in a Senate Banking Committee on Thursday, that the government give banks incentives to turn troubled loans into more affordable mortgages. Yet, most markets ended in the red. Key benchmark indices in Hong Kong, Japan, South Korea, Singapore, China and Taiwan were down by between 1.07% to 7.48%.
Sensex lost 398.20 points or 3.92% to 9.771.70.
Nifty was down 122 points or 3.98% to 2,943.15.