Heavyweights pull down the indices further

03 February 2006

Indices opened lower today as global markets turned weak. US indices closed lower yesterday which affected sentiment across most Asian markets today despite the decline in oil prices.

The Sensex declined below the 9800 mark in early trades and never managed to go past that level in later trades despite many attempts. The Nifty declined below the 2950 level by mid-morning.

The indices remained within a range with a negative bias till late afternoon. Heavy selling in select heavyweights saw both indices dropping sharply. The Sensex declined more than 100 points from the previous close in that fall.

The two heavyweights, ONGC and Reliance Industries, exerted considerable pressure on the indices. ONGC closed nearly 2 per cent lower while Reliance gave up more than 1.5 per cent.

HDFC was the biggest loser among index stocks, closing more than 4 per cent lower.

Metal stocks came under pressure today. Nalco came under pressure after the rally of last few sessions. The stock closed nearly 4 per cent lower. SAIL gave up more than 2 per cent.

FMCG majors ITC and HLL also declined today. ITC lost 2 per cent while HLL gave up more than 1.5 per cent.

Wipro closed more than 2 per cent lower after opening higher on the announcement of a major order from GM.

Jet Airways bounced back after heavy losses of the last couple of weeks. The stock closed with gains of nearly 5 per cent.

Pharma stocks had another good day today. Glaxo gained over 4.5 per cent while Sun Pharma closed more than 4 per cent higher.
Gail, HPCL, Tata Power and Tata Motors were the other prominent gainers.

Sensex closed at 9743, a loss of 101 points, and the Nifty at 2940, lower by 27 points. Nifty February futures closed at a discount of 16 points to the spot index.

US indices declined substantially yesterday on fresh worries that the US Fed would continue to raise interest rates. Latest economic data released yesterday showed a rise in higher labour costs and a decline in productivity. Such data may encourage the Fed to keep interest rates high to fight inflation. Technology stocks were the worst affected as online retailer Amazon reported lower than expected results.

The Dow index closed nearly a per cent lower while the S&P 500 also lost close to a per cent. Losses on the NASDAQ were much higher at 1.25 per cent.

Crude prices declined further yesterday and closed below $65 to a barrel even as the IAEA looks all set to refer the Iranian nuclear issue to the UN Security Council. The decline was attributed to profit booking by large traders. March futures on the NYMEX lost nearly 3 per cent and closed at $64.68 per barrel yesterday. The commodity is trading with marginal gains in early European trades today.

Wipro has landed a significant order from General Motors after much speculation in the markets. General Motors said yesterday that it finalised 5-year IT outsourcing contracts with service vendors including Wipro. Wipro won one contract on its own and 2 sub-contracts from EDS.

Wipro said it expects revenues of around $300 million from the GM order over the 5-year period. The company said revenues would start flowing from the second quarter of next financial year and is planning to double the headcount for the GM project to 1,000.

Capgemini, one of the service vendors to GM, has sub-contracted part of the orders to Satyam Computers. The contracts are expected to fetch revenues of around $150 million for Satyam over the 5-year period.

Satyam also announced the inauguration of a specialised development centre for the auto industry, which will be based in Detroit, US. The centre would employ around 50 people and would offer high technology services including design.

L&T said it has entered into an agreement to acquire a privately held Bangalore based company engaged in defence electronics research. The cost of acquisition and financials of the target company have not been disclosed.

Siemens is setting up a new steam turbine unit at Vadodara. The new unit would manufacture steam turbines with capacity of up to 45 MW. The unit is expected to cost Rs30 crore.

Sun Pharma said it board would meet next week to consider the de-merger of its R&D division along with intellectual property into a separate company. The company is expected to sell part of the new company to private equity players at a later date.

Mid-Cap Action

Mid-caps managed to resist the selling pressure in larger stocks and closed the day with modest gains. The CNX Mid-Cap index gained 15 points to end the day at 4287.

Scandent Solutions said its US division has received an outsourcing order from a state government in the US. The order is worth over $30 million.

McNally Bharat has received orders worth a total of Rs120 crore. The order from CESC is worth Rs50 crore, another from Nalco is worth Rs60 crore and the last one from Binani Cements is worth Rs10 crore.

The board of Sakthi Sugars has approved a proposal to raise up to $50 million from an overseas equity issue. The company is planning to add 60 MW of co-generation capacity at its existing sugar mills. Sakthi would also set up a new mill with crushing capacity of 3,000 tonnes per day and co-generation capacity of 25 MW.