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Duty cuts limit Sensex losses

February 24, 2009

The benchmark index started off on a shaky note and ended Tuesday’s session with losses of 0.24 percent after briefly hitting positive territory on the finance minister’s comments to reduce factory gate duties and service tax.INDIA

The sectoral picture looked weak with all sectors closing in the negative. The BSE Metal Index lead the pack with losses of 2.3 percent and was closely followed by the Banking Index which ended down 1.3 percent.

Shares in Satyam ended 3.4 percent lower with volumes of 8.2 million shares on the BSE. The board of Satyam hopes to invite expression of interest from potential bidders by the end of this week.

The market which was choppy throughout the day, gained momentum and briefly turned positive after acting Finance Minister Pranab Mukherjee said factory gate duties were being cut further and service tax rates lowered by 2 percent to boost economic activity.

The global financial system and economy is showing signs of weakening and this is hurting investor sentiments. On Tuesday Europe and Asia joined Wall Street’s sell off, sending world stocks to their lowest since April 2003.

It seems like investors are loosing confidence in the U.S. plan to tackle the growing financial crisis as credit losses and fears of recession grow. The Indian banking system too is under the scanner with banking stocks continuing their slide.

We have seen in the past that the RBI has reduced the key banking rate from 9 percent to 5.5 percent, but till today full benefit has not passed on to consumers as banks remain risk averse and enforce stricter lending norms.

Addressing the global banking scenario, will the measure announced by the government today help boost sentiment and restore confidence in the markets?

Comments

Tuesday’s pull-back of sensex were driven by ICICI Bank and during last half-hour on announcement of reduction in excise duty and service tax respectively.
Such actions may drive markets for a day or two.The industrial production figures in 3Q 2009 are more alarming than we are aware of.
The revival of market is linked to restoration of strong production base.And this can’t happen unless banks allow easy and low cost finance to industry.It may be adviseable to bring down central bank repo rates to 2%.
The manufacturers will have to respond by lowering cost of production and bringing down prices.This may stimulate consumption.

Posted by A.kapoor | Report as abusive
 

We need a lot more than this to boost the sentiment…Elections are approaching.. There is political uncertainty as well..We are yet to know abt the so called big “third” expected Stimulus..
US stocks are at a 12-year low…Can we be happy and rally in such circumstances.. I really doubt!!

Posted by Aditya | Report as abusive
 

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