Sensex bounces back on excise duty cut

Courtesy : Fin Express.

 The Bombay Stock Exchange benchmark Sensex recovered from early losses on Tuesday on funds covering pending positions amid the government cutting excise duty.

The Sensex tumbled to 8,619.22 points at an early stage, the lowest in three months, before recovering sharply to reduce losses and closed with a moderate fall of 21.15 points at 8,822.06.

Brokers and the funds indulged in covering their long pending positions ahead of the expiry in the derivative segment on Thursday, helping stocks of shrug off initial heavy losses. The government decision to cut excise duty by two per cent fuelled trading sentiment in stocks of consumer durables, fast moving consuming goods and the auto sector.

The 50-share National Stock Exchange index Nifty fell by 2.55 points to 2,733.90, after hitting a low level of 2,677.55 points.

Despite a recovery mode, metal stocks suffered the most as the sector index lost 2.31 per cent to 4,542.24 because bluechips like Tata Steel, Sterlite Industries, SAIL, JSW Steel and Hindalco as base-metal prices in overseas markets recorded heavy losses.

The banking index was the second-worst performer, losing 1.36 per cent to 4,240.39, as State Bank of India, a state-run, largest lender, slid 1.75 per cent to Rs 1,028.25, its worst in almost two years.

Trading sentiment turned bearish after reports came that US Standard & Poor’s 500 Index dropped 3.5 per cent to the lowest level since April 1997. US regulators said they will begin examining which banks have enough capital to survive a deeper recession.

The PSU sector index fell 0.71 per cent to 4,931.06, the healthcare index by 0.53 per cent to 2,582.49, the capital goods index by 0.48 per cent to 5,924.27, the teck index by 0.30 per cent to 1,713.16, the IT index by 0.14 per cent to 2,035.66, the power index by -0.06 per cent to 1,723.38 and the realty index by 0.06 per cent to 1,452.89.

With selling pressure spread over a wide front, the midcap index lost 1.76 per cent to 2,742.45 and the smallcap index by 1.41 per cent to 3,116.11.

The government's decision to cut excise duty improved trading sentiment to some extent. The consumer durables index rose by 0.73 per cent to 1,575.60, the FMCG index by 0.29 per cent to 2,012.82, the auto index by 0.06 per cent to 2,546.04 and the oil and gas index by 0.03 per cent to 6,025.27.