Mumbai: Supreme Court’s ruling in favour of Reliance Industries in a gas price dispute saved local markets from steep falls on Friday, but they still shed 1.3% leading to worst weekly fall in six months as world stocks tumbled on euro zone debt jitters.
The Supreme Court ruled in favour of billionaire Mukesh Ambani, who controls Reliance Industries (RIL), in the dispute, closing a chapter on a five-year battle that now gives the government control over setting prices.
“Given that our target price of 1,220 rupees had factored in an unfavourable outcome for RIL, our fair value of the company would increase by Rs35 on the back of this verdict,” Ambit Capital said in a note.
“More importantly, with uncertainty on the case outcome out of the way, we believe that company’s fundamentals would be back in focus.”
Energy major Reliance Industries, which has the highest weight on the Sensex, rose 2.3%, its biggest percentage point gain in a month, to Rs1,033.85.
“Reliance saved our market today to an extent. But what next from here?,” said Ambareesh Baliga, vice-president of Karvy Stock Broking.
“The euro zone problem is just like subprime. We knew long ago that there was more trouble brewing in there. But people like to ignore doubts and be optimistic,” Baliga said.
“There could be more skeletons hidden in the closet.” Baliga said though the the bias from here was downwards, a steep downside was ruled out.
The court verdict shaved off 22.8% from Anil Ambani-controlled Reliance Natural Resources shares. It fell as much as 26.8% in the day and closed at Rs52.75, its lowest close in 13 months.
Reliance Natural Resources clocked the highest turnover on the BSE with a volume of 106.9 million shares, 21 times its average volume for 30 days.
Other companies controlled by Anil Ambani also took a big hit. Reliance Infrastructure and Reliance Power shed 7% and nearly 9% respectively. Reliance Communications and Reliance Capital declined 2.7% and 3.7% respectively.
The 30-share BSE index .BSESN closed 1.29% or 218.42 points lower at 16,769.11 points, its lowest close since Feb. 26, with 25 of its components losing ground. It declined 4.5% this week. The 50-share NSE index closed 1.4% lower at 5,018.05 points.
Foreign funds have invested a net $6.2 billion in Indian equities in 2010, but the benchmark index is still down nearly 4% so far this year.
World stocks extended sharp falls as a global rout triggered by fears of contagion from the euro zone debt crisis prompted investors to turn to safe-havens. At 3:48pm, the pan-European FTSEurofirst 300 index was down 1.6% while MSCI’s measure of Asian markets other than Japan .MSCIAPJ dropped 1.8%.
On Thursday, US stocks plunged 9% in the last two hours of trading on a suspected trading glitch and fears of a new credit crunch in Europe.
Financials led the decline. Top lender State Bank of India dropped 3.6% while rivals ICICI Bank and HDFC Bank declined 2.9% and 2.7% respectively. Mortgage lender Housing Development Finance Corp shed nearly 1%.
Metals makers fell as base metals prices dropped more than 2% in London trade.
Tata Steel, the world’s eighth-largest steel maker by output, dropped nearly 3%. Sterlite Industries and Hindalco lost 3.5% and 0.8% respectively.
In the broader market, losers outnumbered gainers in a ratio of 4.3:1, while 505 million shares changed hands on the BSE, higher than the volume on Thursday.