Tuesday, 12 February, 2008

India's Sensex Drops to 5-Month Low; Anil Ambani Companies Fall

Most Indian stocks declined as companies belonging to billionaire Anil Ambani, including Reliance Power Ltd., extended losses.

Reliance Energy Ltd., the nation's second-largest utility by market value, fell for the fourth day. Reliance Communications Ltd., India's second-largest wireless company, declined for the second day. Reliance Power dropped 4.8 percent, extending the 17 percent decline on its trading debut yesterday.

``The immediate provocation is that retail and high net worth individuals sold out,'' said Sashi Krishnan, chief investment officer at Bajaj Allianz Life Insurance Co., who oversees $3.6 billion in assets. ``There were a large number of people who had borrowed money to buy this share and they had to exit irrespective of what the stock listed at.''

Five stocks fell for every one that rose on the Bombay Stock Exchange and 11 of the exchange's 13 industry indexes closed lower. The benchmark Sensitive Index, or Sensex, fell for the fifth day, dropping 22.90 points, or 0.1 percent, to 16,608.01. It had risen as much as 2 percent earlier in the day.

The gauge of 30 companies has fallen 11 percent in the past five sessions and has dropped to its lowest value since Sept. 21. The S&P CNX Nifty declined 18.75 points, or 0.4 percent, to 4,838.25.

Reliance Energy fell 46.55 rupees to 1,535.75. The stock has lost more than 25 percent in the past four days. Reliance Communications declined 2.5 percent to 575.70. Reliance Natural Resources Ltd., which secures gas supplies for group companies, fell 5.7 percent to 117.15. It has declined 27 percent in four days.

Banks, Loans

Reliance Power shed 17.95 rupees to 354.55. A global rout in equities dried up demand for new shares after Reliance Power raised $3 billion in India's biggest initial public offering in January. Investors had sought $189 billion worth of shares.

Axis Bank Ltd., India's fourth-largest by market value, led the banking index higher after Finance Minister Palaniappan Chidambaram asked state-run banks to boost home and consumer loans, which he said were the key to economic growth.

``There is a feeling that adequate credit is not being provided to the housing sector and the consumer durables sector,'' Chidambaram said in New Delhi today after meeting chiefs of state-run banks. ``Banks have been asked to pay attention to provide adequate credit to these two sectors as they are drivers of the economy.''

Axis Bank rose the most in more than two weeks, gaining 61.7 rupees, or 6.7 percent, to 989.8. State Bank of India, the nation's top bank by market value, rose 12.15 rupees, or 0.6 percent, to 2,057.40. Kotak Mahindra Bank Ltd. rose 19.65 rupees, or 2.5 percent, to 818.55.

Loan growth in India has eased, with consumers buying fewer automobiles and washing machines and delaying home purchases. Lending grew 22.6 percent in the 12 months through Jan. 25, from 29.8 percent a year earlier, according to data compiled by Bloomberg. State Bank yesterday cut its prime lending rate.

Cairn Pipeline

Cairn India Ltd., the local unit of Cairn Energy Plc, ended a four-day losing streak on the expectation issues related to building a pipeline from its fields to a port have been resolved and on the possibility of additional discoveries.

Cairn rose 10 rupees, or 5.3 percent, to 199.95 rupees, the biggest gain in two weeks. The shares had risen 17.95 rupees earlier in the day.

``There are two possibilities of the stock's surge today -- the pipeline dispute getting completely resolved and chances of a discovery,'' said R.K. Gupta, who manages the equivalent of $120 million of stocks at Taurus Mutual Fund in New Delhi.