Dalal Street came under intense selling pressure as the sentiment was marred by fears of further spike in inflation after the government announced a steep 10 per cent hike in fuel prices. Stocks across the board were hammered brutally with all sectoral indices suffering losses. The 30-share BSE Sensex tumbled 448 points or 2.81 per cent at 15,514.79. The broad-based S&P CNX Nifty was down 130.3 points or 2.76 per cent at 4,585.60. The BSE Sensex has now eroded 900.78 points or 5.48 per cent from 16,415.57 in just three trading days. The Sensex is down 5692 points or 26.84 per cent from its all time high of 21,206.77, struck on January 10, 2008. An analyst with Geojit Financial Services said, “We saw a carnage on the bourse because the hike was more than what market participants expected. They were expecting 5 per cent to 6 per cent increase in petroleum products. Higher petroleum prices have would severe impact on inflation which is already running at new highs. The broad market witnessed selloff.”Higher inflationary expectations caused a selloff in banking and realty stocks. The possibility of a hike in CRR or key interest rates was the reason behind the fall. Even the auto sector witnessed a major selloff. Maruti, Tata Motors and Ashok Leyland ended with losses of around 5 per cent. “Higher petroleum prices will have negative impact on auto sales. The profit margins of the companies can be affected due to high input cost,” said an analyst. The capital goods sector, led by L&T, BHEL and Siemens, was yet another loser at the bourses. Input costs of these companies will rise following the petroleum price hike. Steel and cement stocks which were hammered by traders for the last few weeks once again faced heavy selloff. Sterlite and Tisco were the big losers.Experts said the outlook for the market seems bleak. Both the macro economic and technical factors are giving weak undertones. Majority of the Index heavyweight stocks are trading below their 200 day moving average — showing declining trends. “The only positive factor which the market is looking for is international crude price which has started trading below $125 and is aiming towards $117.5 and $115.6 in the short run. Nifty has all possibilities to test the panic bottom of 4,444 which was recorded on January 22nd 2008,” Geojit said.Experts don’t expect Wednesday’s price hike to be the last measure. “The move, though positive for oil marketing companies, is not a long lasting solution unless crude oil prices come down substantially. OMCs still continue to depend on oil bonds and upstream companies for their profitability. Also, if crude oil prices come down, rollback of prices is also not ruled out,” said Dikshit Mittal of Religare Securities.Meanwhile, the cash-strapped oil companies have got a relief on liquidity front through RBI’s move to buy oil bonds. “To address liquidity problem, RBI and oil firms have entered into an arrangement as per which the bonds will be sold by companies,” said petroleum secretary M S Srinivasan. Motown blues•Initially, car sales may dip, but in long term the hike will be absorbed•Auto firms are already under pressure because of rising input costs and high interest rates•In future, there will be a sharper focus on more fuel-efficient and compact cars•The rising price difference between kerosene and diesel may fuel adulteration
