Mumbai: The BSE Sensex plunged to 2-week low of 17,196.47 Thursday, down 405 points as investors sold stocks amid weakening rupee, allegations of massive losses to the government in coal blocks allocation and shaky overseas markets.
Of the 30 Sensex scrips, 28 tumbled. All the 13 sectoral indices closed in losses, with realty, power, banking, capital goods, metal and refinery stocks being hit hard.
Market heavyweight Reliance Industries dropped 4.15 percent, and Infosys by 1.39 percent. The two carry 20 percent weight on the Sensex.
The rupee's sharp decline against the US dollar to Rs 51 level worried investors that it will inflate government's import bill, especially on account of oil, worsening fiscal deficit situation.
Besides, reminiscent of the 2G spectrum allocation scam, the Comptroller an Auditor General (CAG) said in a draft report that the government lost Rs 10.67 lakh crore on account of allotment of coal blocks to 100 private and public sector companies without auction during 2004-2009.
However, CAG later informed the Prime Minister that media reports on alleged coal scam were "exceedingly misleading".
Sensex moved in a narrow range till late afternoon, but last hour selling pulled it down sharply to 17,196.47, erasing 405.24 points or 2.30 percent. In last two days, it had risen 328.34 points or 1.90 percent.
Similarly, NSE 50-scrip index Nifty tumbled 136.50 points or 2.54 percent to two-week low of 5,228.45.
"A mix of domestic and global factors hurt investor sentiment. The leakage of a draft CAG draft report weighed markets down. The Indian rupee weakened against the US dollar further spooked sentiments," said Paras Bothra, Research Head, Ashika Stock Brokers.
Globally, European markets were trading weak, adding to investor woes, he said.
As per Sebi data, FIIs bought shares worth Rs 651.70 crore yesterday.
Asian stocks were down in early trade after a survey showed China's manufacturing has shrunk. Key indices in China, Singapore and South Korea finished with marginal losses, although Hong Kong, Japan and Taiwan ended with gains.
European markets were trading sharply lower in the afternoon. CAC (France), DAX (Germany), FTSE (UK) were down by up to 1.52 percent. The US index futures too were indicated weak opening today.
Major losers from the Sensex pack were Jindal Steel (7.26 percent), DLF (5.01 percent), Tata Steel (4.55 percent), Tata Power (4.42percent), Reliance (4.15 percent), ICICI Bank (3.84 percent), L&T (3.76 percent), SBI (3.27 percent), BHEL (3.24 percent), Hindalco (3.13 percent), Bharti Airtel (2.63 percent), HDFC Bank (2.48 percent), Bajaj Auto (2.36 percent), NTPERCENT (2.31 percent), M&M (2.19 percent), Maruti Suzuki (2.19 percent), Tata Motors (2.17 percent), Cipla (2.06 percent), ITC (1.75 percent), Sterlite (1.60 percent), Gail India (1.55 percent), HUL (1.48 percent), Infosys (1.39 percent) and Wipro (1.25 percent).
However, Coal India shot up 2.40 percent and Hero Motoco 0.48 percent.
Among the sectoral indices, the BSE-Realty fell 4.25 percent, Power - 3.62 percent, Bankex - 3.41 percent, Capital Goods - 3.37 percent, Metal - 3.29 percent, Consumer Durables - 3.15 percent, Oil&Gas - 2.74 percent, Auto - 1.89 percent and PSU - 1.48 percent.
The total market breadth turned negative as 2,019 stocks finished with losses, while 879 stocks ended with gains. The total turnover declined to Rs 2,984.72 crore from Rs 3,302.43 crore yesterday.
A coalition of left of centre parties is well positioned to win South Korea's parliamentary elections on Wednesday with a platform of improving social services and renegotiating a free-trade pact with the United States.
And a victory in the National Assembly elections by the opposition Democratic Unity Party (DUP) would likely fore-shadow a defeat by the scandal-plagued conservative administration in presidential elections in December.
A win by the DUP coupled with the party's candidate winning the presidency in December could further stall Canada's already stalled free trade talks with South Korea.
The DUP has capitalized on public disquiet about the U.S.-South Korea free trade agreement that came into force last month.
Opponents of the FTA say the deal will hurt domestic agriculture and investment, sentiments that have been fed by the American International Trade Commission estimates that U.S. exports to South Korea will expand by almost $11 billion in the first year of pact's operation.
Among young and left-leaning voters there are also strong objections to what is seen as the current administration's favouring of big business, especially the large "Chaebol" industrial conglomerates.
Recent local elections have shown strong support among voters for the redistribution of wealth through such things as improved welfare payments, free school lunches and subsidized university fees.
President Lee Myung Bak and his Grand National Party, South Korea's dominant political force during the decades of authoritarian rule until the transition to democracy in the late 1980s, have tried everything to slough off the image of failure that has clung to him since he took office in 2008.
But even changing the party's name to Saenuri, or the New Frontier Party (NFP), has not so far staunched the steady drip, drip of scandals that have dogged the Lee administration from the start.
That sorry catalogue got a new entry last week when the national prosecutors office announced it is investigating allegations the government illegally tapped the telephones and otherwise spied on up to 2,600 people in politics, the media and labour movements.
The scandal came to light when a former officer in the prime minister's office gave a USB memory stick containing images of more than 20,000 pages of documents to the Korean Broadcasting System.
Government politicians have attempted to dilute the scandal by pointing out that some of the documents refer to surveillance that took place before Lee and his party came to power.
Lee, who managed South Korea's largest construction company before entering politics, came to office amid allegations of involvements in a scam by an investment house.
The whiff of ethical corner-cutting has dogged him and his associates ever since.
Most recently the Speaker of the National Assembly resigned over allegations of vote buying in February. And in December the chairman of Lee's party quit after an official was identified by police as being involved in a cyber attack on the country's election commission. Recent polls show support for Lee's administration is 27 per cent, half what it was when he came to office.
All this might be forgiven if Lee and the NFP had deliver ed on his promise to raise per capita income to $40,000 and maintain an annual economic growth rate of seven per cent.
But Asia's fourth largest economy has managed an average annual growth rate of only 3.2 per cent during Lee's term in office, down from 4.3 per cent during the troubled tenure of his predecessor Roh Moo Hyun.
Inflation is also up at about 3.5 per cent and unemployment was at 4.2 per cent in February.
However, unemployment among young people in the 15 to 29 age range is double the national average at 8.3 per cent.
It is these young voters who are expected to throw their support behind the opposition DUP, which has pledged to create 3.3 million new jobs.
Latest polls show support for the NFP at about 30 per cent with the DUP just behind, but within the margin of error at 28 per cent.
But political strategists in South Korea say 30 per cent support for the NFP represents the rock-bottom following among hard line conservative voters.
It is not enough for the NFP to hold a majority in the National Assembly.
At the moment polls show a large group of about 30 per cent of undecided voters who are expected to be swayed by events in the last days of the campaign.
The National Election Com-mission said last month that a survey it conducted suggests a 10 per cent increase in voter turnout on Wednesday, fuelled by young people in the 20s and 30s.
These voters will mostly go for the DUP or allied left-of-centre parties.
One of the first lessons bankers absorb in their training is the importance of timing.
In fact, it starts even earlier than that, with the most fundamental calculations taught in business school around the world: the time value of money.
Put simply, a dollar today is worth more than a dollar tomorrow.
So when someone is more concerned about *when* they are paid than *what* they paid, they're not in the best position to cut a deal.
It's easy to get the sense that this is weighing on the minds of those tasked with the titanic (if not impossible) task of recouping the £45.5bn her Majesty's Treasury decided to "invest" in RBS as it teetered on the brink of collapse at the peak of the 2008 credit crisis.
On the one hand, UK Financial Investments Ltd (UKFI), which manages the government's myriad banking stakes, probably doesn't want to hold onto "zombie" RBS shares in perpetuity. On the other, if it dumps the husk of the government's 82 PERCENT stake now, it's unlikely to come within a Parliamentary mile of the £45.5bn chalice.
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But even considering that sympathetic view, it's still incredibly difficult to understand the logic behind the leak that gave us today's RBS headlines (and make no mistake: it was a leak and Auntie's journalists are usually the preferred source to float such stories into the news cycle).
RBS shares have been stuck in a 26p/28p per share rut since February, its Coutts & Co. subsidiary was only yesterday fined £8.75m for "serious" and "systemic" lapses in money laundering controls and weeks-long talks to sell its Asia-Pacific businesses to Malaysia's CIMB Group have yielded nothing.
It's not like the overall market conditions for investment banks have improved of late, either. Eurozone data suggests the region is alarmingly close to slipping back into recession and the UK looks mired in a flat-growth strategy as Chancellor George Osborne focuses on debt and deficit reduction.
So why now?
The story has driven some strong traffic in RBS shares, with volumes Tuesday close to the 90-day average, according to Reuters, but the news agency also reported that talks with the presumptive buyer - member of the Abu Dhabi Royal Family - have been months in the making and haven't advanced to any significant degree.
And let's not forget that it was only a month ago that CEO Stephen Hester told the BBC's "Andrew Marr" programme that it would take "quite a few years" to exit the government's stake and that opportunities to sell would come "in good time".
It's hard to imagine that "good time" has arrived.
Perhaps the leak was a calculated effort to gauge market reaction or to tease out any potential rival bidders? In either event, it's unlikely to impress the Abu Dhabi contingent, or their savvy advisor, Amanda Staveley, who's PCP Capital Partners has helped steer some of their money into Barclays and Manchester City Football Club.
In fact, efforts to "pump" the price of RBS shares in the middle of negotiations with the Abu Dhabi royals is a tactic best described as more boiler-room than drawing-room.
Malaysia's CIMB Group can't be terribly pleased with the developments, either, and may likely demand more surgery -beyond the closures of units in South Korea and Indonesia - on the Asia-Pacific assets as a result.
And unless the leak ignites a longer-term improvement in RBS shares, it won't keep the fickle attention of market participants, either. They've had more than a year to assess the value of the bank under the stewardship of Stephen Hester, and they seemed, until today, comfortable with a 27p share price.
Timing is everything. And in this case, it seems, if the timing turns out to be wrong, the government will find itself more in the "when am I paid" not the "what am I paid" side of the RBS trade.
It’s a policy fierce enough to cause great suffering among Iranians—and possibly in the long run among Americans, too. It might, in the end, even deeply harm the global economy and yet, history tells us, it will fail on its own. Economic war led by Washington (and encouraged by Israel) will not take down the Iranian government or bring it to the bargaining table on its knees ready to surrender its nuclear program. It might, however, lead to actual armed conflict with incalculable consequences.
The United States is already effectively embroiled in an economic war against Iran. The Obama administration has subjected the Islamic Republic to the most crippling economic sanctions applied to any country since Iraq was reduced to fourth-world status in the 1990s. And worse is on the horizon. A financial blockade is being imposed that seeks to prevent Tehran from selling petroleum, its most valuable commodity, as a way of dissuading the regime from pursuing its nuclear enrichment program.
Historical memory has never been an American strong point and so few today remember that a global embargo on Iranian petroleum is hardly a new tactic in Western geopolitics; nor do many recall that the last time it was applied with such stringency, in the 1950s, it led to the overthrow of the government with disastrous long-term blowback on the United States. The tactic is just as dangerous today.
Iran’s supreme theocrat, Ayatollah Ali Khamenei, has repeatedly condemned the atom bomb and nuclear weapons of all sorts as tools of the devil, weaponry that cannot be used without killing massive numbers of civilian noncombatants. In the most emphatic terms, he has, in fact, pronounced them forbidden according to Islamic law. Based on the latest U.S. intelligence, Secretary of Defense Leon Panetta hasaffirmed that Iran has not made a decision to pursue a nuclear warhead. In contrast, hawks in Israel and the United States insist that Tehran’s civilian nuclear enrichment program is aimed ultimately at making a bomb, that the Iranians are pursuing such a path in a determined fashion, and that they must be stopped now—by military means if necessary.
Putting the Squeeze on Iran
At the moment, the Obama administration and the Congress seem intent on making it impossible for Iran to sell its petroleum at all on the world market. As 2011 ended, Congress passed an amendment to the National Defense Authorization Act that mandates sanctions on firms and countries that deal with Iran’s Central Bank or buy Iranian petroleum (though hardship cases can apply to the U.S. government for exemptions). This escalation from sanctions to something like a full-scale financial blockade holds extreme dangers of spiraling into military confrontation. The Islamic Republic tried to make this point, indicating that it would not allow itself to be strangled without response, by conducting naval exercises at the mouth of the Persian Gulf this winter. The threat involved was clear enough: about one-fifth of the world’s petroleum flows through the Gulf, and even a temporary and partial cut-off might prove catastrophic for the world economy.
In part, President Obama is clearly attempting by his sanctions-cum-blockade policy to dissuade the government of Israeli Prime Minister Binyamin Netanyahu from launching a military strike on Iran’s nuclear facilities. He argues that severe economic measures will be enough to bring Iran to the negotiating table ready to bargain, or even simply give in.
In part, Obama is attempting to please America’s other Middle East ally, Saudi Arabia, which also wants Iran’s nuclear program mothballed. In the process, the U.S. government and its allies have even had Iran’s banks kicked off international exchange networks, making it difficult for that country’s major energy customers like South Korea and India to pay for the Iranian petroleum they import. And don’t forget the administration’s most powerful weapon: most governments and corporations do not want to be cut off from the U.S. economy with a GDP of more than $15 trillion—still the largest and most dynamic in the world.
Typically, the European Union, fearing Congressional sanctions, has agreed to ceasetaking new contracts on Iranian oil by July 1st, a decision that has placed special burdens on struggling countries in its southern tier like Greece and Italy. With European buyers boycotting, Iran will depend for customers on Asian countries, which jointly purchase some 64% of its petroleum, and those of the global South. Of these, China and India have declined to join the boycott. South Korea, which buys $14 billion worth of Iranian petroleum a year, accounting for some 10% of its oil imports, has pleaded with Washington for an exemption, as has Japan which got 8.8% of its petroleum imports from Iran last year, more than 300,000 barrels a day—and more in absolute terms than South Korea. Japan, which is planning to cut its Iranian imports by 12% this year, has already won an exemption.