Market had such a bad day today that many traders have given up hopes of a pre-budget rally. They now hope for a decent market-friendly budget, which would help the market to recover. Though there were signs of fatigue in the indices last week, not many had expected such a steep fall on the first trading day of the week.

The losses were severe in stocks, which are very active in the F&O segment. This has led to most analysts believing that this weak phase may last only till the excesses in the derivatives segment are corrected. Stocks of companies like Hindalco and Suzlon, which have announced large overseas acquisitions, were the worst hit.

Sensex closed with massive losses of 348 points at 14191 and the Nifty crashed 129 points to end at 4058. Nifty February futures closed at a discount of 4 points to the spot index.

Hindalco crumbled 14.13 per cent on concerns that the $2.6 billion in debt proposed to be taken to finance the Novelis acquisition would affect the company's financial performance in the short to medium term.

Among other metal stocks, SAIL lost 5.33 per cent while Nalco ended 5.21 per cent lower.

Suzlon Energy also got punished following a mega acquisition in Europe. Though the financing details have not been disclosed so far, the market expects interest costs to rise in the short term for the company. The stock ended 13.25 per cent lower

VSNL crashed 10.11 per cent on reports that the government has declined to sell the remaining 26 per cent stake it holds in the company to Tata group under an agreement signed at the time of privatisation

While stocks of Hindalco and Suzlon got punished for large acquisitions, failing in a large acquisition bid was also not considered favourably. Reliance Communication slipped 4.42 per cent after it lost out the race to acquire Hutch-Essar. The emerging competitive scenario in the telecom sector is expected to adversely affect the company. Among other telecom stocks, MTNL gave up 8.72 per cent.

Engineering stocks were the other big losers as industrial growth for December, though much higher than expectations, was lower than that for November. BHEL shed 6.4 per cent and Siemens gave up 4.81 per cent. Lower industrial growth also pulled down Gujarat Ambuja Cement 4.65 per cent.

There were only 4 gainers among Nifty stocks. OBC was the best performer with gains of 1.2 per cent

Hero Honda gained 0.98 per cent. Tata Power added 0.36 per cent and HLL ended 0.32 per cent higher.

Global markets / crude oil
Asian markets were mostly weak today. Singapore slipped more than 1.55 per cent while South Korea ended 0.95 per cent lower. Malaysia gave up 0.75 per cent and Hong Kong lost 0.4 per cent. Indonesia ended 0.35 per cent lower.

Shanghai continued its recovery and ended with gains of 2.8 per cent while Thailand gained 0.3 per cent.

European markets opened firm but slipped subsequently. Major indices are trading with losses of between 0.3 and 0.5 per cent each in early afternoon trades.

Crude oil prices have corrected after gaining towards the end of previous week. Near month NYMEX futures have lost nearly a per cent and are trading around $59.3 per barrel in European trades today.

Large-cap news flow

• Hindalco has acquired Canadian aluminium rolled products manufacturer Novelis for an enterprise value of close to $6 billion. The acquisition would add nearly $8.5 billion to the company's top line immediately and would be financed partly by raising additional debt. Novelis is the largest manufacturer of aluminium rolled products globally with a market share of 19 per cent
• Bharti Airtel said the company's promoter group would acquire a 5.6 per cent stake in the company from Vodafone for $1.6 billion. Vodafone would continue to hold a 4.4 per cent stake. Bharti and Vodafone have also entered into a partnership agreement to share telecom infrastructure including towers.
• Gail India has incorporated a subsidiary which would implement the proposed petrochemicals project in Assam. The company would hold a 70 per cent stake in the subsidiary.
• Dabur has allotted bonus shares in the ratio of one share for every two shares held
• GE Shipping has sold one of its old crude tankers
• Bajaj Auto has clarified that though it is considering a de-merger of its business divisions, there are no concrete developments in this regard

Mid-Cap Action
Mid-caps and small caps saw heavy selling pressure for the second day and ended with much bigger losses than the large caps. The CNX Mid-Cap index ended 202 points, or 3.82 per cent, lower at 5090. BSE mid-cap index lost 4.01 per cent and the BSE small cap index ended with losses of 4.84 per cent.

Real estate stocks were the worst hit in today's slide. Akruti Nirman, which listed last week, was the worst performer among mid-caps with losses of 18.09 per cent. Parsvnath Builders, Unitech, Mahindra Gesco and Ansal all lost heavily.

Bombay Rayon Fashions, Srei Infrastructure Finance, Aptech, Network 18, Entertainment Network, Century Textiles and Lanco Infratech were the major losers among the major mid-cap losers.

Steel Strips Wheels ended at 10 per cent upper circuit for the second day. Cambridge Technologies recovered from a weak start and ended 8.25 per cent higher.

Pioneer Embroideries, Hindustan Composites, TV Today and Sarla Poly were the other major mid-cap gainers

Mid-cap news flow

• GHCL has acquired a US-based home furnishings manufacturer for $35 million. The target company has revenues of around $160 million and post acquisition, GHCL's North American revenues would increased to over $400 million per annum
• Federal Bank has announced a rights issue in the ratio of one share for every share held
• Ansal Properties and Infrastructure has announced a bonus issue in the ratio of one share for every share held
• Shareholders of Gati would meet next month to consider the merger of four privately held entities with the company
• The board of Marsons has approved the proposed acquisition of an Australian company
• Stelco Strips would issue 26.31 lakh warrants and 26.31 lakh equity shares to promoters and other investors
• Talbros Automotive is planning to raise an additional $15 million to fund expansion plans
• Omax Autos said it expects to start commercial production at its new unit for Tata Motors by early 2008
• NIIT Technologies has announced a new suite of insurance software for both life and non-life insurance companies
• Falcon Tyres is considering a merger with a Mumbai-based company and has appointed experts to complete the valuation
  
• Welspun India would use the Tommy Hilfiger brand under license in the home market for home furnishings
  
• Sunil Hitech has won various orders worth a total of Rs63 crore
  
• Mukta Arts has sold the video rights of five of its forthcoming movies for Rs4.5 crore
  
• i-Flex Solutions said Oracle's stake in the company has increased to 82.92 per cent after the recent open offer
  
• Compact Disc India would issue 13.5 lakh convertible warrants
  
• Subhash Projects has received new orders worth a total of Rs63 crore for power transmission lines
  
• Rajesh Exports has completed its $150 million FCCB issue. The bonds would be listed in Singapore and would have a conversion price of Rs575 per share
  

*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.