Hopes of a near term pull back in the market were dashed by the CRR hike by RBI and the indices were very weak in early trades.

The Sensex slipped nearly 300 points from yesterday's closing levels and the Nifty crashed below 4000 before recovering.

After another fall in mid-morning trades, the indices inched up gradually but faced frequent bouts of selling. The afternoon saw a sustained recovery, helped by gains in metals and technology stocks besides ONGC, and the Nifty was back in the green before closing. The Sensex remained in the red because of heavy losses in frontline banking stocks.

Sensex closed with losses of 81 points at 14010 and the Nifty gained 2 points to end at 4047. Nifty February futures closed at a premium of 11 points to the spot index.

Banking and financial stocks tumbled on concerns of lower profitability following the CRR hike. OBC was the worst performer among index stocks with losses of 7.22 per cent. SBI crashed 6.06 per cent while PNB closed 2.45 per cent lower.

Among private banks, HDFC Bank lost 4.81 per cent and ICICI Bank gave up 4.34 per cent. HDFC closed 2.35 per cent lower.

Among the smaller banks, Corporation Bank lost 5.6 per cent and Canara Bank gave up 4.72 per cent. Bank of India gave up 4.6 per cent and Union Bank closed 4.3 per cent lower.

Auto stocks faced severe pressure on concerns that higher interest costs would lead to lower demand for cars, but recovered part of their losses later. Maruti lost 3.8 per cent and Tata Motors lost 1.91 per cent.

Grasim continued to decline and lost another 3.25 per cent.

Suzlon gave up all its gains from yesterday and closed 2.53 per cent lower.

Metal stocks recovered in afternoon trades and were the best performers among index stocks. Nalco rallied 4.77 per cent while Hindalco recovered 2.56 per cent after losing more than 17 per cent in the previous 2 sessions. Tata Steel ended with gains of 1.43 per cent.

Telecom stocks also recovered after the recent decline. MTNL was the best performer with gains of 3.72 per cent. Bharti continued to rally and added another 2.98 per cent while Reliance Communications recovered 2.28 per cent after the sustained decline over many sessions.

ONGC gained 1.72 per cent on news of stake acquisition in an overseas exploration block and helped the Nifty considerably.

Among tech stocks, Wipro added 1.94 per cent and HCL Tech gained 1.56 per cent.

Reliance Energy was the other gainer and ended 1.83 per cent higher.

Global markets / crude oil
US indices rallied yesterday as confidence about sustained economic growth returned. Rumours about a possible acquisition bid for Alcoa sent the stock soaring and helped the indices. The recovery in crude oil prices pushed up oil stocks and gave further lift to the indices.

The Dow closed more than 0.8 per cent higher and the S&P 500 gained more than 0.75 per cent. NASDAQ ended with gains of close to 0.4 per cent.

Asian markets rallied today following the gains in US indices yesterday. Shanghai continued its good run and ended with gains of close to 2.6 per cent while Indonesia gained over 1.35 per cent.

South Korea added 1.25 per cent and Singapore bounced back over a per cent.

Malaysia added over 0.9 per cent and Thailand closed 0.75 per cent higher. Hong Kong recovered close to 0.4 per cent after slipping more than 2 per cent yesterday.

European markets opened firm and are holding on to their gains. Major indices are trading with gains of between 0.1 and 0.4 per cent each in early afternoon trades.

Crude oil prices recovered yesterday after the International Energy Agency hiked its global demand forecast. Near month NYMEX futures ended more than 2 per cent higher at $59.06 per barrel yesterday. The commodity is trading with modest losses below $59 per barrel in European trades today.

Large-cap news flow

• Tata Motors said Fiat would manufacture and market the company's new pick-up truck in Latin America and Europe under license from the company. Production by Fiat would start next year with an expected volume of 20,000 units per annum. Tata Motors has also signed an agreement with Iveco, a unit of Fiat, to explore possible cooperation in the commercial vehicles segment.
  
  
• ONGC has signed agreements with Italian oil company Eni to swap participating interests in oil exploration blocks. ONGC would acquire a 20 per cent stake in an offshore exploration block operated by Eni in the central African country Congo Brazzaville. In return, ONGC would cede a 34 per cent interest in an offshore block in the Mahanadi basin. ONGC is in talks with Brazilian oil company Petrobras for a similar arrangement, according to reports.
  
  
• Bank of Baroda has formed an alliance with Italian financial group Pioneer Global Asset Management for asset management business. The bank would divest a 51 per cent stake in its asset management subsidiary to Pioneer.
  
  
• Punjab National Bank has raised its benchmark lending rate to 12.25 per cent from 11.75 per cent.

Mid-Cap Action

Mid-caps and small caps also saw high volatility before recovering in the afternoon. The CNX Mid-Cap index ended 12 points, or 0.24 per cent, higher at 5095. BSE mid-cap index gained 0.25 per cent and the BSE small cap index ended with losses of 0.29 per cent.

Praj Industries, Kopran and Tulip IT were all locked in 10 per cent upper circuits

Shah Alloys, South East Asia Marine, Gujarat Sidhee, TVS Srichakra and Aftek Limited were the other major mid-cap gainers

Dhanalakshmi Bank, Atlanta, Arihant, Srei Infrastructure Finance, Vimta Labs, DS Kulkarni, Kajaria Ceramics and Pioneer Embroideries were the major losers among the major mid-cap losers.

Mid-cap news flow

• Gitanjali Gems has acquired a Canadian diamond manufacturer and retailer for an undisclosed sum.
  
  
• Pyramid Saimira said it has installed 78 digital projection systems across its movie halls in Tamil Nadu and is planning to install another 30 in the states of Andhra Pradesh and Karnataka.
  
  
• Cranes Software was signed an agreement with a US-based company to distribute its products in India.
  
  
• Blue Star would set up its 5th manufacturing unit in Maharashtra and would invest Rs35 crore in the first phase.
  
  
• Lanco Infratech has received the letter of acceptance from the NHAI for a highway project in Karnataka to be executed on a BOT basis.
  
  
• Magma Leasing has received High Court approval for the merger with Shrachi Infrastructure Finance.
  
  
• Accentia Technologies has added another 120 employees at its healthcare BPO in Trivandrum as part of a $5 million contract. The company is planning to add another 500 employees at its Bangalore and Trivandrum facilities.
  
  
• Sangam India would raise up to $22 million from a FCCB issue.
  
  
• Kalpataru Power has denied media reports that the company is planning to bid for the assets of UK-based power company Globeleq.
  
  
• Ganesh Housing has completed a QIP issue to raise Rs227.5 crore from 70 lakh equity shares at a price of 325 per share.
  
  
• Tanla Solutions said its subsidiary Tanla Mobile would spend $95 million for overseas expansion.
  
  
• Kale Consultants has received an order to develop a web-enabled software solution to automate container freight station operations.
  
  
• Datamatics Technologies has denied media reports that the company is close to acquiring a US-based BPO company.
  
  
• Educomp Solutions has won an Rs18 crore 5-year contract to implement technology-based education in Karnataka schools.
• Hindustan Oil Exploration has started drilling its second exploration well in the Cauvery basin.
  
  
• SKS Ship has entered into a JV for acquiring and managing barges on inland waterways.
  
  
• The board of Gemini Communication would meet next week to consider a FCCB issue.
  
  
• Binani Industries said the IPO of its subsidiary Binani Cement is expected to open next month.
  
  
• The board of Autoline Industries is meeting next week to consider acquisitions and issue of equity shares as part consideration for such acquisitions.
  

*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.