Recovery across Asia in morning trades led to a bounce back in India, which was far stronger than expected. Both frontline indices surged nearly 3.5 per cent each in early trades and held on to the gains for some time.

Both indices drifted downwards thereafter and by mid-morning had lost half their early gains. A brief attempt at recovery was followed by further selling pressure and by afternoon the Sensex slipped into the red.

Once the indices entered negative territory the now familiar panic set in, as traders who were enticed to build long positions earlier in the day rushed to cover them. After losing more than 2.5 per cent each, markets recovered modestly in the last half hour of trade.

Sensex saw a high of 9387 and a low of 8799 - an intra-day swing of nearly 600 points. Nifty oscillated 172 points between a high of 2768 and low of 2596.

Sensex closed with losses of 133 points at 8929 and the Nifty lost 30 points to close at 2633. Nifty June futures ended at a premium of 15 points to the spot index.

Technology stocks were among the worst hit in today's trade following the declining trend in US tech stocks for more than a week now. Infosys was the biggest loser, closing nearly 6 per cent lower. TCS, which started the decline in morning trades, ended more than 5.5 per cent lower.

Tata Tea was the biggest loser among index stocks, closing nearly 8 per cent lower.

After BHEL yesterday, today it was ABB's turn to suffer a major decline among engineering stocks. The stock slipped substantially and ended more than 7 per cent lower.

Pharma stocks also saw weakness in the afternoon as Dr Reddy's lost over 3.5 per cent and Sun Pharma dropped more than 3 per cent.

Jet Airways declined nearly 3.5 per cent even after the fall in oil prices.

IPCL, Tata Motors and Hindalco were among the other major losers.

Oil stocks surged and were not at all affected by the afternoon sell-off. Stocks of oil marketing companies surged after crude oil prices fell substantially yesterday. Ironically, even oil producers like ONGC would benefit from a fall in oil prices as their subsidy burden would go down.

HPCL was the biggest gainer among index stocks, closing nearly 9 per cent higher. BPCL added close to 7 per cent and Indian Oil ended more than a per cent higher.

ONGC surged more than 3 per cent in early trades and held on to that level till early afternoon. The stock finally ended nearly 1.5 per cent higher. Reliance Industries closed with marginal losses.

Power utility stocks found substantial buying interest today. Tata Power added more than 3.5 per cent while Reliance Energy ended nearly 3.5 per cent higher even in a falling market.

Among autos, M&M added close to 3 per cent while Bajaj Auto added nearly 2 per cent.

Bharti, Nalco and Glaxo were among the other gainers.

Global markets / crude oil
US markets slipped further yesterday as interest rate worries worsened after release of data showing higher than expected producer price or wholesale price inflation. Traders are expecting more bad news on consumer inflation in data due to be released today. The sharp decline in crude oil prices saw oil stocks slipping in the afternoon.

The Dow erased the remaining gains for the calendar year and closed 0.8 per cent lower while the S&P 500 slipped more than a per cent for the second day. NASDAQ extended its losses to the eighth straight day and closed around 0.9 per cent lower.

Major Asian indices recovered after a weak opening and closed with modest losses. South Korea was the big gainer, closing nearly 1.5 per cent higher. Japan had a volatile day as the index rallied after a negative start before giving up part gains to close more than 0.6 per cent higher.

Thailand was the big loser ending more than 3.5 per cent lower. Shanghai and Malaysia gave up more than a per cent each and Singapore closed over 0.5 per cent lower.

European markets opened with modest gains but some of them have slipped towards mid-day. Major indices in Western Europe are trading mixed.

Crude oil prices saw one of the worst falls yesterday after the IEA said higher prices have led to a decline in demand growth for petroleum fuels in the US. Though demand from China remains strong, the IEA has cut average global demand for the rest of the year by 10,000 barrels per day.

Near month NYMEX futures lost more than 2.5 per cent yesterday and closed at $68.56 per barrel. The commodity is trading with modest gains in early European trades today.

Large-cap news flow

• L&T has formed a JV in Kuwait with a local business group to bid for construction projects. The JV would focus of electro-mechanical construction projects in the oil and gas, power and infrastructure sectors. Financial details of the venture have not been disclosed.
  
  
• Shareholders of L&T have approved the merger of Datar Switchgear with the company.
  
  
• Wockhardt has received preliminary US FDA approval for an anti-epileptic drug in tablet form. The company said total market potential for the drug in the US is $800 million.
  
  
• VSNL is setting up internet access centres at 68 railway stations across the country. Each centre would have up to 20 computers and would offer a host of services. The company is planning to set up these centres over the next few weeks.
  
  
• Following further decline in international zinc prices, Hindustan Zinc has lowered domestic prices by Rs13,400 per tonne but kept lead prices at the same level. This is the second price cut by the company this month after a series of price hikes over the last many months.
  
  
• Media reports indicate that the government has asked Reliance Communications to provide more details about its GSM plans. The company, the largest CDMA operator, had asked for GSM spectrum in various cities leading to speculation that it may switch over completely to GSM.

Mid-Cap Action

In line with the trend in large caps, smaller stocks also opened with substantial gains before giving it all up later in the day. A large number of stocks were trading with gains of between 5 and 10 per cent in early trades. But most of them declined in the afternoon and closed with substantial losses.

The CNX Mid-Cap index was trading with gains of over 2 per cent in early trades, but finally ended with losses of 101 points, or 2.93 per cent, to end the day at 3335. Market breadth on the NSE turned highly negative in afternoon trades.

The BSE mid-cap index lost 3.22 per cent and the BSE small cap index closed 3.54 per cent lower.

Large mid-caps like TV 18, Aztec Software, Sasken Communication and Visual Soft all lost between 10 and 15 per cent each.

Excel Industries, Sriram Transport Finance, Gitanjali Gems, Monnet Ispat and Mirza Tanners were among the other major mid-cap losers, all losing more than 10 per cent each.

Srei Infrastructure Finance, Sintex, Bombay Dyeing, Gokaldas Exports, Gujarat Industries Power and JK Cement were among the mid-cap gainers.

Mid-cap news flow

• Carborundum Universal has acquired a 49-per cent stake in a Chinese company for $4.9 million. The Chinese firm is a leading manufacturer of synthetic diamonds, used in the manufacturing of abrasives, and had revenues of $10 million in 2005.
  
  
• The open offer made by ADAG for 20 per cent of Reliance Natural Resources has closed without any success. Only less than 0.5 per cent of the company's equity base was tendered under the offer made at a price of Rs25.65 per share.
  
  
• The board of Tricom India would meet next week to consider a bonus issue.
  
  
• Siyaram Silk would issue bonus shares in the ratio of one share for every 2 shares held.
  

*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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