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Source: media reports

Shares down 3rd week; bribery scandal jolts

Shares down 3rd week; bribery scandal jolts
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First Published: Fri, Nov 26 2010. 05 05 PM IST
Updated: Fri, Nov 26 2010. 05 05 PM IST
Mumbai: Shares fell for the third straight week, their longest such losing streak since February, shaken by a bribes-for-loans scandal that sent banks and realty shares plummeting.
Weak world markets added to the woes with the main stock index hitting a 11-week closing low, shedding 0.9% on Friday.
Central Bureau of Ivestigation told Reuters it was probing 21 companies for possible links to a corporate loans bribery case, in which eight financial executives have so far been arrested. The scandal is one of several to dog the coalition government led by Prime Minister Manmohan Singh.
Shares in Hindustan Construction Co whose hill-side township unit Lavasa Corp was mentioned in the initial Central Bureau of Investigation (CBI) report on the bribery case, tumbled as much as 20% to their lowest since May 2009.
The stock, which fell about 10% in morning trade, slid more following an inquiry by India’s environment ministry into its project built outside the western Pune city.
The 30-share BSE Index declined 0.94% or 181.55 points to 19,136.61, its lowest close since 9 September. The index shed 2.3% on the week. The 50-share NSE index declined 0.8% to 5,751.95 points.
Twenty-four of its components closed in the red.
“The market is reacting to any newsflow or talk related to the current developments. But, the scope and extent is not yet known,” said Nitin Rakesh, CEO of Motilal Oswal’s asset management business.
Declining shares were more than five times the number of advancing ones, pointing to the weakness in market amid heavy trading volume of 655 million shares.
“People need to look out for opportunities that provide value and, quality is always in fashion. Companies with gold standards of governance and strong management repute will be preferred for now,” Rakesh said.
Most companies named in the bribery case were infrastructure and real estate firms, which pulled the BSE real estate sector index down 4.7%. The index fell nearly 15% on Friday morning.
The scandal in the banking sector has tarnished the image of Asia’s third-largest economy, coming on the heels of a telecoms scandal that has paralysed the Indian parliament and also following the corruption-riddled Commonwealth Games.
Infrastructure firm Jaiprakash Associates closed 8% lower after media reports named it in the bribery scandal.
Jaiprakash Power Ventures shed 4.3% as its chairman said it had received a notice from the CBI regarding an ongoing probe into a loan-bribery scandal.
Jindal Steel & Power closed 2.2% lower after the environment ministry said on its website it has asked the company to prove why it should not cancel a green nod given for the firm’s 6-million-tonne-per-year Orissa plant.
Unitech, which has interests in real estate and telecom closed 4.8% lower after falling more than 26% in the morning.
The company has not been named in any media reports so far, but traders said the market was reacting to the possibility of more realtors coming under the CBI scanner.
Other companies alleged to be involved in the scandal by media such as Suzlon Energy and DB Realty declined 4.2% and 10% respectively, while Money Matters shed 10%.
The CBI on Wednesday arrested eight officials from state-run listed companies, including the chief executive of LIC Housing Finance, for taking hundreds of millions of dollars in bribes to facilitate large corporate loans.
Senior executives at state-run Punjab National Bank, Bank of India and Central Bank of India were also taken into police custody late Wednesday. LIC Housing, Central Bank of India and Punjab National Bank dropped between 2.8% and 11.9%.
Bank of India reversed early losses and closed 2.1% higher.
The pan-European FTSEurofirst 300 index was down 1% by 4:10pm, while the MSCI’s measure of Asian markets other than Japan declined 1.5%.
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First Published: Fri, Nov 26 2010. 05 05 PM IST
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