The Hindu : Business : Rising oil prices drag Sensex below 13000-mark

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Wednesday, Jul 02, 2008
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Rising oil prices drag Sensex below 13000-mark

Special Correspondent

Political uncertainty, inflationary pressures hit sentiment

MUMBAI: Political uncertainty along with fears of inflationary pressures and high global oil prices dragged the domestic stock market indices to a new 16-month low. The benchmark Bombay Stock Exchange (BSE) 30-share sensitive index (Sensex) closed below the 13000-mark with a loss of 499.92 points or 3.71 per cent at 12961.68. The broad-based 50-share Nifty closed below the 4000-mark with a loss of 143.80 points at 3896.75.

In the last three straight sessions, the Sensex had lost over 1460 points. Tuesday’s fall was led by realty, banking, metal, auto, consumer durables and PSU stocks. Hike in interest rate by major banks, State Bank of India and ICICI Bank and housing finance major, HDFC, has pulled down bank stocks and other interest sensitive stocks. BSE’s realty index lost 7.21 per cent, Bankex 5.62 per cent, metal 5.40 per cent and automobile 4.91 per cent.

Among the broader indices, BSE midcap lost 244.62 points or 4.54 per cent at 5141.86, smallcap 316.85 points or 4.73 per cent at 6385.11 and BSE-500 lost 212.53 points or 4.08 per cent at 5002.84.

Most European stocks closed in the negative territory. In the U.S. markets stocks opened sharply lower on Tuesday on concerns about rising oil prices and the Dow Jones Industrial Average (DJIA) opened 99.17 points down or 0.87 per cent at 11250.84. Global oil price is still ruling above $142 a barrel and the Israel-Iran face-off is expected to create further upward pressure on global crude oil prices.

Foreign institutional investors (FIIs) have taken out around $6.44 billion (Rs. 27,692 crore) in the first six months of 2008 and it is “the biggest ever sell-off since India first opened its door to them”, according to some reports. Some of the FIIs are reeling under heavy losses in the U.S. credit markets.

A mix of political uncertainty with high inflation would be more alarming for the domestic stock markets. High global oil prices are likely to play more havoc to Indian economy as India imports roughly 70 per cent of its oil requirements. Asian markets started out the second half of the year on Tuesday with more of the same: sinking shares and soaring oil prices.

Japan’s market fell for a ninth straight session and key indices in China and India — the region’s two biggest emerging economies — both tumbled more than 3 per cent.

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