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Iraq plays party-pooper

Mumbai, June 13: Rising crude oil prices following the tensions in Iraq roiled both the stocks and the rupee today. The Sensex and Nifty recorded their biggest decline in over four months, while the domestic currency fell 52 paise to finish at 59.77 against the dollar.

Equity investors, who had not shown any signs of exhaustion from their buying momentum, turned jittery on fears that the surge in oil prices could result in high inflation and even derail the government’s plans to introduce bold measures such as the complete deregulation of diesel prices.

The BSE Sensex slipped 348.04 points, or 1.36 per cent, to 25228.17, while the NSE Nifty dropped 107.80 points, or 1.41 per cent, to 7542.10.

Global crude prices climbed to a nine-month high after militants took control of cities in Iraq. Brent crude was at around $115 per barrel after militants closed in on Iraq’s capital Baghdad. The development led to the US warning that it would not hesitate to take military action. Worries that such tensions may disrupt crude supplies fuelled the price rise.

Any spike in crude prices is not good news for the domestic economy, which imports over 80 per cent of its requirements. Besides worries over a widening trade deficit and high inflation, a surging oil bill may pose hurdles for the Narendra Modi-led government in pushing reforms to reboot the economy.

Analysts said after the sharp uptick in stocks over the past few days, investors also used the opportunity to offload their positions.

The Sensex resumed higher at 25677.05 and rose to a day’s high 25688.31 on initial buying on the back of favourable retail inflation and IIP data that was released after markets hours yesterday. It failed to maintain the momentum because of the global developments and ended at 25228.17 — the biggest daily drop since January 27 when it slipped 426.11 points.

“Oil price concerns caused by geo-political concerns in Iraq marred sentiments. Going ahead, we see monsoon progress and budget to be the two key triggers,” Dipen Shah of Kotak Securities said.

Block deals

L&T Finance today sold its 4.55 per cent stake in Union Bank for over Rs 183 crore. L&T Finance, which held the stake through L&T Vrindavan Properties, sold its entire shareholding of over 2.47 crore shares through a block deal on the BSE.

In a separate deal, India Global Competitive Fund, part of the Calcutta-based Srei group, today offloaded around 22 lakh shares of United Spirits for a little over Rs 597 crore.

Equinox Management Partners were the sole buyers of these shares.

The stake sale comes following a buzz that L&T Finance is looking to merge with private sector bank Yes Bank.

While stocks of oil marketing companies ended with losses ranging from 5-8 per cent, rate sensitive sectors such as banking and realty also ended in the red.

 
 
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