Yesterday the indices saw the worst intra-day decline since May 2004 while today they pulled off the second best intra-day recovery in history. The Sensex gained more than 500 points from its intra-day low while the Nifty regained over 150 points from its low.

The day started with high volatility as the markets searched for direction. After opening with modest gains, the indices declined before recovering and going back into the green. The uptrend lasted only few minutes and the markets came down again.

Reports that non-ferrous metal prices were trading substantially lower in Asian trades led to a fresh bout of selling in metal stocks. There was no support from any sector as the indices dropped sharply to their lows by noon.

The recovery was triggered by cement and FMCG stocks which found buying interest in early afternoon trades. Reliance Industries also bounced back, helping the markets considerably.

After recovering a significant portion of the early losses, markets slipped again later in the afternoon. As metal prices gained in early European trades, the indices surged in the last half hour of trade. The Sensex gained more than 100 points from yesterday's close in closing minutes.

Sensex closed with gains of 52 points at 11874 and the Nifty gained 20 points to close at 3523. Nifty May futures closed at a premium of 8 points to the spot index.

Cement stocks surged in afternoon trades and provided significant support to the market recovery. Gujarat Ambuja ended as the biggest gainer among index stocks, with gains of over 7.5 per cent.

Among other cement stocks, ACC added close to 5 per cent while Grasim closed nearly 3 per cent higher. Ultratech was the biggest gainer in the sector with gains of nearly 10 per cent.

Reliance Industries recovered today after losing more than 10 per cent in the last few sessions. The stock ended more than 2 per cent higher. Group company IPCL closed more than 4 per cent higher.

FMCG stocks bounced back strongly, led by Dabur. After yesterday's sharp correction, Dabur recovered in spectacular fashion and ended nearly 5.5 per cent higher. HLL gained over 3 per cent while ITC ended 2 per cent higher.

Aluminium stocks opened substantially lower before recovering in the afternoon as international metal prices gained. Hindalco, which announced a price hike in the morning, ended more than 3 per cent higher.

Auto stocks gained on expectations that the fall in metal prices would boost profitability. M&M added over 2 per cent while Tata Motors ended nearly 1.5 per cent higher. Among 2-wheerler stocks, Bajaj Auto added close to 3.5 per cent.

Banking stocks remained weak, despite the recovery in markets. PNB was the biggest loser among index stocks, closing nearly 3.5 per cent lower. OBC ended nearly 3 per cent down while SBI closed flat.

Engineering stocks remained under pressure today. L&T lost more than 2.5 per cent while ABB ended over 2 per cent lower.

The recovery in other metal stocks did not help Tata Steel which ended more than 2 per cent lower.

RPL continued to slide today as well and touched a low of Rs70.7 before recovering. The stock finally ended nearly 5 per cent lower. Among other refinery stocks, Essar Oil lost another 9 per cent.

Tata Chemicals, Glaxo, HPCL, HCL Tech and Tata Tea were among the other losers.

Global markets / crude oil
US markets were mixed yesterday as the broader indices gained while technology stocks remained weak. The decline in oil and commodity prices has raised hopes of easing inflation which may prompt the Fed to stop rate hikes.

The Dow added more than 0.4 per cent while the S&P 500 ended gained one-quarter of a per cent. Technology stocks continued their weakness and ended nearly one-quarter of a per cent lower.

Asian markets tumbled today as well on continued concerns than a weak US Dollar would affect exports from the region. Commodity stocks came under renewed pressure as commodity prices crashed yet again in Asian trades. Among the major indices, South Korea lost over 2 per cent while Japan ended 2 per cent lower. Singapore lost nearly a per cent while Hong Kong ended more than 0.5 per cent lower.

Even Shanghai buckled under the selling pressure. The Shanghai composite index, which had gained over 14 per cent in the last 6 sessions, ended more than 3 per cent lower.

Crude oil prices declined yesterday on bearish demand forecasts from IEA and OPEC. The stand-off over the Iranian nuclear issue is showing some signs of cooling off with new initiatives for dialogue with Iran. Near month NYMEX futures slipped over 3.5 per cent to close at $69.41yesterday. The commodity is trading with modest gains in European trades today.

Large-cap news flow

• According to unconfirmed media reports, Infosys is in negotiations to acquire US based technology consulting firm Capco. The deal may cost up to $200 million, according to these reports.
• Tata Tea is one of the bidders for acquiring a state-run tea and sugar company in Morocco, according to news agency reports. The minimum bid price is over $50 million.
• Dr. Reddy's has launched a new anti-asthma drug in the country. The company is manufacturing the product under license from a European drug firm. Dr. Reddy's said the market potential for the drug is Rs60 crore per annum.
• Wipro has acquired a US based mechanical design services firms and its Indian subsidiary in an all-cash deal. Wipro would absorb around 500 employees of the acquired companies.
  Mid-Cap Action

Mid-cap stocks slumped before noon and the index was trading with losses of around 4.5 per cent at one point. The afternoon pull back could not erase all the losses as most mid-cap and small-cap stocks remained deep in the red. The CNX Mid-Cap index lost 45 points, or 0.88 per cent, to end the day at 4950. Market breadth was highly negative on the NSE.

Bombay Rayon Fashion, Goetze India, Indian Hume Pipe, Shyam Tele, Everest Kanto, Raymond and Varun Shipping were among the major mid-cap gainers.

VLS Finance, Suryalakshmi Cotton, Sadbhav Engineering, Shanti Gear and Zuari Agro were among the significant mid-cap losers on the NSE.

Mid-cap news flow

• Shyam Telecom has won a license to offer GSM services in the UK. The 10 year license is for providing coverage in office buildings and campuses. The company has not announced the amount of investment required or the likely date of launching its services.
  
  
• Punj Lloyd has received a pipeline order worth Rs138 crore from Gail India for the Dahej-Uran project.
  
  
• The board of GV Films would meet next week to consider an overseas issue to raise up to $300 million. The company would consider acquisition of multiplexes and an international TV channel.
  
  
• Sakthi Sugars would raise up to $50 million from a FCCB issue. The bonds would be issued in 2 series, having maturity periods of 3 years and 5 years. The 3-year bonds are convertible at Rs270.88 per share while the 5-year bonds have a conversion price of Rs282.66.
  
  
• Dabur Pharma would raise the equivalent of $25 million from an equity or convertible bond issue through the QIP route.
  
  
• Salora International would set up a JV with overseas partners for manufacturing TV components.
  
  
• The board of Talbros Automotive would meet next week to consider a preferential issue of equity shares.
  
  
• Kirloskar Oil Engines has received new orders worth Rs250 crore for ship engines.
  
  
• Strides Arcolab would raise $50 million out of the earlier announced $100 million fund raising programme through the QIP route.
  
  
• Dishman Pharma has clarified that though the company is planning overseas acquisitions, it is yet to firm up any such deal.
  
  
• United Western Bank would come out with a rights issue in the ratio of 4 shares for every 5 shares held.
  
  
• The board of Kirloskar Ferrous would meet next week to consider a rights issue.
  

*Disclaimer: The author may have positions in some of 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.

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