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BUSINESS NEWS

FROM INDIA
Wednesday, September 17, 2008
Markets reel as Lehman collapse sends Russian markets crashing

Mumbai, Sep 17 (IANS) Indian equities markets continued to reel Wednesday from
the effects of the US financial tsunami as the Lehman Bros. collapse led to the biggest
crisis in the Russian financial markets in a decade.

Trading on the rouble-denominated Micex Stock Exchange was suspended


indefinitely at 12:10 p.m. Wednesday for the second consecutive day after its index
plunged by 10 percent within an hour into trading after wiping out a 7.6 percent gain
at the opening.

Trading on Micex was suspended Tuesday as well after its index fell 17 percent in
one day, the biggest drop since the sovereign debt default by the Russian government
and currency crash ten years ago.

'Every one knows that the ripple effects of the Lehman collapse will continue to be
felt for quite some more time so the mood is so bad that there are simply no genuine
buyers in the markets,' said Jagannadham Thunuguntla, equity head of the Delhi-
based Nexgen Capitals Ltd.

Nexgen is the securities arm of India's fourth largest share brokerage firm, the SMC
Group.

At the close of trading, the 30-share benchmark sensitive index (Sensex) of the
Bombay Stock Exchange (BSE) fell to 13,262.90, down 255.90 points or 1.89 percent
over its previous close of 13,518.80.

The broader based 50-share S&P Nifty of the NSE also fell to finish at 4,008.25,
down 66.65 points or 1.64 percent against its previous close Tuesday at 4,074.90.
The BSE mid-cap index also fell 77.62 points or 1.49 percent to close at 5,139.63
points.

The BSE small cap index fell to close at 6,214.75, down 74.66 points or 1.19 percent
over its previous close at 6,289.41.

'The only buyers were bears trying to cover short positions and some institutional
bottom fishing,' Thunuguntla said.

The Russian stock market rout Wednesday came even after the Russian finance
ministry offered Tuesday $44 billion to the country's three biggest banks OAO
Sberbank, VTB Group and OAO Gazprombank in an attempt to stop the market crash.

The Russian government also injected Tuesday $20 billion into the interbank lending
market to contain soaring borrowing rates as credit dried up in the wake of the
Lehman Brothers bankruptcy.

The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand,
leapt 25 basis points to a record 11.08 percent Wednesday.

'In December last year, when the Sensex at 21,000 was at its peak, one share of HDIL
was selling at Rs.1500. Today you can buy shares of almost all the big realty
companies included in the BSE realty index for Rs.1400,' Thunuguntla said.

Housing Development and Infrastructure Ltd (HDIL) is one of the stocks included in
the BSE's realty sectoral index.

The other realty stocks including that of HDIL that could be bought (one each)
Wednesday for Rs.1400 are: Ansal Properties & Infrastructure Ltd., DLF Ltd.,
Indiabulls Real Estate Limited, Omaxe Ltd., Parsvnath Developers Ltd., and Unitech
Ltd.

'Lehman Bros had a lot of exposure in realty companies such as DLF and Unitech
which is the reason why there are no buyers even when these stocks are selling at 80-
85 percent below their peaks,' Thunuguntla said.

Any major recovery in the short term is unlikely as more banks across the world such
as Citibank or Bank of New York come under pressure, he said.
'The financial world is today much more interlinked because of third party
guarantees and counter guarantees so that when entities such as Lehman collapses
the ripple effects can spread very wide and may take a long time to fully play out,' he
said.

The Russian market collapse erased any positive cues that could have come from the
news that the US central bank had agreed to bail out insurance giant American
Insurance Group (AIG), he said.

Sectorally, the realty sector was the worst hit with the BSE realty index losing 4.13
percent Wednesday. Banks, metals and fast moving consumer goods were the other
top losers, although all sectors showed losses.

Of the Sensex stocks, only 7 finished in the black.

The top gainers were Tata Motors, up Rs.19.30 or 4.84 percent to Rs.417.70. Oil and
Natural Gas Corp finished at Rs.979.35, up Rs.26.65 or 2.80 percent.

Wipro Ltd closed at Rs.399.75, gaining Rs.8.00 or 2.04 percent. ACC Ltd gained
Rs.9.85 or 1.69 percent to end at Rs.592.60.

Sterlite Industries was the top loser shedding Rs.38.40 or 8.04 percent to close at
Rs.439.30. Ranbaxy Labs, on reports that the Federal Drug Authority of the US had
banned 30 of its drugs, fell to Rs.379.10, down Rs.26.80 or 6.60 percent.

ICICI Bank dipped to Rs.560.30, down Rs.31.05 or 5.25 percent. ITC Ltd slid to
Rs.184.40, losing Rs.9.85 or 5.07 percent.

The sentiment was clearly bearish with 1740 or 64 percent scrips declining, 886 or
33 percent advancing and 86 or 3 percent remaining unchanged.