Market had a firm opening with the indices retaining the momentum from Friday's strong closing. Disappointing most traders, the market slipped into the red soon after and lost major ground in the last hour of trade. Sensex closed at 6657, down 43 points and the Nifty at 2096, down 13 points. The Nifty futures again slipped into a discount of 7 points to the spot index.
On Friday, oil posted its highest closing ever at $56.73 to a barrel. US markets were mixed with the Dow closing marginally higher while the NASDAQ closed lower after slipping into the lowest levels for the year. Indian tech ADR's had a good day with Infosys, Wipro and Satyam all managing to close with gains. ICICI Bank and Tata Motors were major gainers with gains of more than 2 per cent each.
Infosys was one of the few winners today as foreign brokerage CLSA said it expects the next year guidance for the company to be around 25-30 per cent growth in revenue and 35-40 per cent growth in profits. The stock rallied on this news and closed with gains of close to 2 per cent.
Satyam announced a deal with global tyre major Bridgestone for ERP solutions on SAP platform. ERP services margins are better than those for general IT services and this deal means Satyam is trying to grow out of its low margin businesses. The stock closed with gains of more than a per cent.
Oil marketing stocks saw good demand on news that government is considering a hike in the prices of petrol and diesel. The petroleum ministry confirmed that a cabinet note for the purpose has been circulated. The market is expecting a hike of at least Rs2 to Rs2.50 per litre as against the Rs4 per litre demanded by the oil marketing companies.
There was a lot of positive news flow from ONGC today. The company expects a revenue growth of close to 40 per cent for the current year on the back of high oil prices. Profitability is expected to remain flat as it expects a subsidy burden of close to Rs4,500 crore for the year. It is also planning to hike the capacity of its refining subsidiary MRPL to 15 million tonnes per annum and set up a new refinery in Rajasthan.
Tata Steel received a rating of Baa2 from Moody's for its overseas debt issue. The rating agency has given a stable outlook for the company on the basis of strong financials and integrated operations. The management indicated that the company is trying to grow faster than ever before and is taking vertical integration further by acquiring more coal mines. Going forward, the company expects iron ore, scrap and coal prices to harden making life difficult for non-integrated steel manufacturers. The company is confident of maintaining its profitability as it is an integrated player and steel demand is expected to grow at around 8 per cent per annum.
Mahindra & Mahindra signed a joint venture agreement with French auto major Renault to manufacture the mid size sedan Logan in India. Logan is a low cost model developed by Renault's Czech subsidiary Dacia for emerging markets like India. The car is expected to be launched in 2007 and the company expects to manufacture 50,000 cars per year. M&M will hold a 51 per cent stake in the JV and Renault will hold the balance.
In the Zee-BCCI case, the Madras High Court ruled that cancellation of contract by BCCI was incorrect and Zee can sue BCCI for compensation. The stock rallied more than 2 per cent on this news.
Tobacco major ITC announced a price hike in select brands of cigarettes to off set the hike in excise duty announced in the budget. The stock rallied on announcement of this news but declined later to close in the red.
Auto stocks were weak with Maruti being the biggest loser. The pending fuel price hike is expected to further dampen the slowing demand growth. Auto companies are also facing pressures on margins because of rise in input costs like steel prices.
Frontline telecom stocks like Bharti, VSNL and MTNL all ended in positive territory. The department of telecommunications has reportedly initiated discussions with MTNL and BSNL on the proposed merger.
Allahabad Bank shot up on reports of a public issue to raise around Rs900 crore. The market expects the price to be around Rs90, which is a discount of more than 10 per cent to the current price. Investors should recall the experience in Punjab National Bank which had appreciated substantially on news of the public issue but declined after the issue was closed.
Hexaware Technologies announced two order wins from the US worth a combined $10 million. Hexaware is one of the largest IT service providers in the PeopleSoft platform. PeopleSoft is now a part of Oracle. The stock closed more than a per cent higher.
Offshore services company, Dolphin Offshore, announced yet another order for $14 million for work in the Bombay High oil field. The stock was locked in the upper circuit of 5 per cent.
Bajaj Electricals was another winner in the mid-cap space after a domestic brokerage came out with an extremely positive view. Analysts expect the company's power transmission tower business to grow at a fast rate. The stock gained 10 per cent.
Sugar stocks saw some action with Bajaj Hindustan and Balrampur Chini attracting good interest. EID Parry, which has some sugar capacity, has announced a stock split.
Small steel stocks were very volatile once again. After posting good gains in morning trades, many of them closed in the red.
All the positive signals from Friday's late rally have been wasted in the weakness of today's last half an hour of trade. FII inflows have slowed down though they were net buyers to the extent of $30 million on Friday. Market may remain sideways with a downward bias as it is a short trading week, Friday being a holiday.
*Disclaimer: The author doesn't have any position in the stocks specifically mentioned above at the time of writing this article. This analysis/report is only for the purpose of information and is not an investment advice. Readers are advised to consult a certified financial advisor before taking any investment decisions. While efforts have been made to ensure the accuracy of the information provided in the content the author or publisher shall not be held responsible for any loss caused to any person whatsoever.