Indian markets closed nearly flat with marginal losses as traders struggled to evaluate global market cues from the US $700 billion bailout plan, money market fund losses, and implications of permitting Goldman Sachs and Morgan Stanley to operate as commercial banks. Analysts noted traders were taking a pause to understand news related to rising credit costs in India, a weakening US dollar, and the financial crisis representing the biggest challenge since the 1929 Great Depression. The Sensex and Nifty indexes ended the day with small losses, as two sectors gained while others declined led by capital goods, power and auto stocks.

1. Markets close nearly flat as traders grapple with data
9/22/2008 6:41:00 PM
Mumbai, Sep 22 (IANS) Lacklustre, directionless trading saw Indian equities markets close nearly flat
Monday with marginal losses as investors took a breather and were still trying to evaluate the
avalanche of global cues, analysts said.
The 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) finished at
13,994.96, down just 47.36 points or 0.34 percent.
The Sensex opened strong, up nearly 200 points and then fell by nearly 342 points by mid-afternoon
and finally recovered to end nearly flat with marginal losses.
The broader based 50-share S and amp;P Nifty index of the National Stock Exchange (NSE) also
ended nearly flat at 4,223.05, reflecting a small loss of 22.2 points or 0.52 percent over its previous
close last Friday.
It too followed a similar trend as the Sensex - opening strong, falling by mid-afternoon and then
recovering to end nearly flat with marginal losses.
The BSE mid cap index finished at 5,220.96, down just 7.82 points or 0.15 percent.
The BSE small cap index closed at 6,194.11, shedding 21.88 points or 0.35 percent against its
previous close last Friday.
'Traders are still trying to understand all the global data such as the developments regarding
investment banks, the $700 billion US bail out plan, and developments on the US money market
front,' said analyst Jagannadham Thunuguntla.
Thunuguntla is the head of capital markets in India's fourth largest share brokerage firm, the Delhi-
based SMC Group.
'Perhaps for the first time after the Great Depression in the US, even US money market funds which
are considered the safest investment instruments have notched losses and are trading below their
face values,' he said.
'The oldest US money market fund, the Reserve Primary Fund closed Friday below its face value of $1
mainly due to redemptions as the fund has a large exposure to Lehman Bros,' Thunuguntla said.
'Over the last few days US money market funds have seen redemptions of $89 billion and we are still
trying to understand the full implications,' he said.
'Similarly, the US budget deficit has gone up today by exactly $700 billion from $10.615 trillion to
$11.315 trillion which means the bailout of banks will be financed entirely through deficit financing,'
he said.

2. 'This will also mean that the dollar will now start weakening on a long term basis and this also will
have some impact on markets as foreign institutional investors will now tend to stick to assets
denominated in currencies other than the dollar,' he said.
Already the rupee has begun to appreciate against the dollar, he pointed out. Indian central bank the
Reserve Bank of India's reference rate was Rs.45.40 to a rupee up from Rs.46.71 on Thursday and
Rs.46.32 Friday.
The reference rate is based on 12 noon rates of select Mumbai banks.
'Traders are also trying to understand the full implications of the news that Goldman Sachs and
Morgan Stanley have been permitted to float commercial bank subsidiaries,' said another Delhi-based
analyst Manoj Krishnan.
He is a portfolio strategist and US-trained financial chartered analyst of Price Investment Management
and Research Services.
'Traders are taking a breather and trying to digest all the news rocking the financial markets,' he said.
'Though global money markets have cooled down there are signs that credit is becoming costlier in
India,' Thunuguntla said.
The Mumbai Interbank Offer Rate (Mibor) has gone up to 16 percent, he said, adding call money rates
were also very volatile ranging from 9 percent to 15 percent and closed at 14 percent.
Normally these rates rule at around 6-7 percent.
'Although these rates are applicable only to the immediate short term and do not indicate any long
term trends, there are indications that the cost of funding new projects will go up,' said Thunuguntla.
'The RBI is expected to intervene and inject liquidity into the system but the million dollar question is
when,' he said.
quot;The main thing is, this is the biggest financial crisis after the Great Depression of 1929, and it will
take some time to understand all the implications,quot; he said by way of explaining the reasons behind
the lacklustre and directionless trading Monday.
Of the 13 BSE sectoral indices, only two - fast moving consumer goods and metal stock indices
showed gains. All others lost with capital goods, power and auto stocks being the worst hit.
Top gainers were ACC Ltd, up 3.22 percent, Tata Steel (2.95 percent), ITC Ltd (2.12 percent) and
Hindustan Unilever (1.69 percent).
Top losers were Satyam Computers, losing 4.69 percent, Jaiprakash Associates (3.84 percent), Maruti
Suzuki (3.17 percent) and Ranbaxy Laboratories (2.7 percent).
While 1,234 or 46.29 percent stocks advanced, 1,354 or 50.79 percent declined and 78 or 2.93
percent remained unchanged.