Rouble Review Makes Sensex Wobble

After a prolonged hibernation, bears got their act together, hammering the Sensex down by nearly 84 points.

It was the turn of the Russian currency to hog the limelight yesterday. While the Russian government has increased the band within which the value of the rouble will be determined by market forces, the market interpreted it as a devaluation with immediate effect.

The first targets were companies with exposure to Russia irrespective of the quantum of their exposure. Dr Reddy's Labs, Nestle, Tata Tea, ITC and Ranbaxy were the immediate casualties. Even though nobody knows exactly how much these companies stand to lose, wide spread panic and rampant short selling resulted in the scrips losing nearly 5-6 per cent.

Players say that firstly, with a devaluation in rouble, Russia's imports will become dearer. If they cut on imports, bottomlines of these companies, which export goods to Russia, will be hit. Secondly, players say that a lot of companies are yet to receive money from Russia for the goods already exported. In case the economic situation in Russia worsens, the recovery of dues look difficult, players added.

Analysts said that in some cases, the fall in scrip prices were unwarranted while in others, the extent of damage arising from a weak rouble could be substantial. In case of Dr Reddy's Labs, exports to Russia account for around 18 per cent of the total exports. Analysts, however, feel that the possible impact on the company could be much lower than what other companies like Tata Tea and Nestle could suffer.

Trading in the Dr Reddy's scrip was frozen after there were only sellers at the counter. This was one scrip which had been steadily bucking the bearish trend at the bourses over the past month.

Profit booking continued at the Zee Telefilms counter with the scrip testing the lower end of the circuit filter during intra-day trading. On Friday, foreign funds are reported to have sold around 3.5-4 lakh shares of the scrip.

A leading UK-based fund is reported to be gradually booking profits at the ITC counter. On Friday, it is reported to have sold close to 90,000 shares of the scrip. On the same day, the off shore fund of a bank is reported to have sold around one lakh shares of the SBI scrip.

Yesterday, foreign funds were reported to be pressing sales at the Gujarat Ambuja counter apart from other key index stocks though the exact quantities could not be confirmed. Yesterday, the scrip plummeted to new 52-week low during intra-day trading.

Among key index scrips, Reliance Industries continued to slip to new lows on relentless selling pressure coupled with minimal buying interest. While players are of the firm view that the scrip is an ideal pick at current valuations, the prospects of two leading funds waiting to dump shares at the counter is making the buyers think twice.

Sustained buying interest continues at the HCL Infosystems counter where a US-based fund is reported to be steadily accumulating shares over the past few trading sessions. Trading was frozen during intra-day trading after there were no sellers but the scrip price fell marginally towards the close of trading.

Another counter which remained firm even in yesterday's falling markets was the Hindustan Inks and Resins scrip. Trading on the BSE was frozen after there were no sellers at a new 52-week high of Rs 100.80. The scrip touched a new 52-week high of Rs 104.55 on the NSE with over 30,000 shares changing hands.

On Friday, domestic institutions, mainly SBIMF and UTI, were reported to have been buyers at the Britannia, Digital Equipment, Pfizer, Zee, East India Hotels, BFL Software and Indian Hotels counters. Market players feel that the Telco scrip could come under further selling pressure during the week as its sales volumes for the month of July are not very encouraging. As against a sales figure of around 10,000 vehicles in June, analysts expect a fall of around 30 per cent in sales in July.