The strong pull back, which saw the frontline indices gain significantly from their year lows posted earlier this month, finally ended in a sharp fall today. As often with such corrections, the decline came as a much-awaited development - this time the Mittal-Arcelor merger which had pushed up steel stocks - unfolded.

Markets opened with modest gains but slipped into the red soon after. After a mid-morning recovery, more weakness set in and pulled down the indices to new lows.

Selling pressure increased in afternoon trades and heavyweights slipped substantially. Long positions were covered ahead of the derivative settlement due this Thursday and some fresh short positions were built up on expectations of a US interest rate hike.

Sensex closed with losses of 371 points at 10042 and the Nifty lost 107 points to close at 2943. Nifty June futures ended at a premium of 23 points to the spot index.

Steel stocks had seen a good build-up of positions last week on expectations of friendly merger between Arcelor and Mittal Steel. Most of these positions were settled as the merger was announced over the weekend, pulling down steel stocks considerably.

SAIL was the biggest loser among index stocks, closing nearly 7.5 per cent lower. Tata Steel lost more than 6.5 per cent. Both stocks had opened with strong gains which attracted a lot of intra-day traders and led to further weakness when they exited in the afternoon.

Among other metal stocks, Hindalco lost more than 6.5 per cent and Nalco declined 5 per cent.

Index heavyweight ONGC ended with massive losses of over 4 per cent. Reliance Industries was firm till afternoon, but declined and closed more than 2.5 per cent lower.

MTNL was the biggest loser among telecom stocks, closing more than 6.5 per cent lower. VSNL declined more than 6 per cent.

Auto stocks, which were among the major gainers in the pull back, came under pressure today. Tata Motors lost nearly 6 per cent while Maruti ended nearly 5.5 per cent lower.

Jet Airways declined further on concerns of negative fallouts from the failed Air Sahara acquisition. The stock lost 5.5 per cent.

HDFC was another big loser among index stocks, closing nearly 5.5 per cent lower. SBI and ICICI Bank lost nearly 3.5 per cent each.

Among technology stocks, Satyam lost more than 4.5 per cent and TCS ended nearly 4 per cent lower. Infosys lost nearly 3 per cent while Wipro shed almost 2.5 per cent.

BPCL was the big loser among oil marketing stocks, closing more than 5 per cent lower.

There were only two gainers among Nifty stocks and both of them ended with handsome gains. SCI added nearly 3 per cent while HDFC Bank ended more than 2.5 per cent higher.

Global markets / crude oil
Asian markets had a mixed day as global equity markets await the US Fed decision on short-term interest rates. Shanghai added 1.7 per cent and Singapore closed more than a per cent higher. South Korea added more than 0.75 per cent and Japan ended with modest gains. Indonesia, Malaysia, Thailand and Hong Kong ended with marginal losses.

European markets are also subdued ahead of the US interest rate decision. Major Western European indices are trading with modest losses of less than 0.2 per cent each.

Crude oil prices have declined in Asian and European trades today. Near month NYMEX futures is trading with losses of nearly 40 cents at around $70.50 per barrel in early European trades today.

Large-cap news flow

• , a subsidiary of Tata Tea, is acquiring acquire a US-based coffee company for $220 million. The acquisition, to be funded through equity and debt, would make Tata Coffee a major player in the US retail coffee segment.
  
  
• Transworks, a wholly owned subsidiary of Aditya Birla Nuvo, is has acquired a Canadian BPO company for $125 million. After the acquisition, Transworks will emerge as one of the largest BPO companies with revenues of around $300 million.
  
  
• Ranbaxy has received US FDA approval to launch a generic version of Merck's blockbuster drug Zocor in the US markets with 180 day exclusivity. US market for Zocor, a key drug for coronary heart disease, is $4.6 billion per year. The tablet size for which Ranbaxy received the approval has a market size of $513 million.

Mid-Cap Action

Mid-caps and small caps also declined substantially after the heavy gains of previous week. They opened the day on a positive note, but soon lost ground on profit booking. Selling pressure increased in afternoon trades as the large caps also declined further.

The CNX Mid-Cap index ended with losses of 158 points, or 3.92 per cent, to end the day at 3848. Market breadth on the NSE was highly negative for most of the session.

BSE mid-cap index lost 4.26 per cent and the BSE small cap index tumbled 4.76 per cent today.

Allcargo Logistics, Eurotex Industries, Cosmo Films, Vaibhav Gems, Satnam Overseas, Rallis India, Entertainment Network, KEC and Amara Raja Batteries were among the major mid-cap losers, all losing more than 10 per cent each.

Aarti Drugs, Eicher Motors, Steel Strips Wheels, Pearl Global, Unitech, Mukand Engineering and Calsoft were among the mid-cap gainers.

Mid-cap news flow

• Subex Systems has completed the acquisition of UK-based Azure Solutions and the company has been renamed as Subex Azure.
  
  
• Three African banks have selected Flexcube, the core banking software suite from i-Flex Solutions.
  
  
• Ramco Systems has won an order for its ERP software suite from OTC pharma company Amrutanjan.
  
  
• Mid-Day Multimedia is due to launch the Bangalore edition of its afternoon newspaper tomorrow.
  
  
• Pratibha Industries has entered into a long term cooperation agreement with an Austrian company to bid for tunnelling projects.
  
  
• Megasoft has confirmed that it had received a proposal to acquire VisualSoft, but the company is yet to take any decision.
  
  
• Hexaware Technologies has tied-up with a company having expertise in statistics and econometric services to offer business analytics services like business intelligence and data warehousing.
  
  
• Paramount Communications has won orders worth Rs20 crore for power distribution cables.
  
  
• Novopan Industries would merge two privately held companies of the promoter group and the resin division of another promoter group company with itself.
  
  
• The board of R Systems has approved the acquisition of a US-based technical support company for $10.7 million.
  
  
• Assam Company has allotted 8.1 crore convertible warrants at a price of Rs23.25 each to overseas investors.
  
  
• KEC International has received new orders worth Rs198 crore from Power Grid Corporation for construction of transmission lines.
  
  
• Sanwaria Agro would consider a stock split at its next board meeting scheduled early next month.
  
  
• The board of Orissa Sponge would meet later this week to consider a bonus issue.
  
  
• Hotel Leelventure would split its Rs10 face value shares into 5 shares of Rs2 each.
  
  *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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