Markets opened on a firm note, continuing from yesterday's strong closing despite weakness in global markets. Momentum buying in frontline stocks continued in early trades and the sensex touched a new lifetime high of close to 8260 and the Nifty crossed 2515.

Selling pressure emerged by early afternoon, pulling down the frontline indices from their highs. Markets gave up all the early gains and both the sensex and Nifty lost more than a third of a per cent each before recovering. Short covering in the last half hour helped the indices to recover most of their losses.

The sensex closed at 8189, a loss of 5 points, and the Nifty at 2492, a loss of 8 points. Nifty September futures closed at a discount of 6 points to the spot index.

Losses in ONGC and Reliance Industries were the main reason for the weakness in the indices. Among the frontline stocks supporting the indices were banking majors SBI and ICICI Bank. HDFC also was among the major gainers, closing well over 2 per cent higher.

Technology stocks had a mixed day today. While Wipro added close to 2 per cent, TCS came under selling pressure and lost well over a per cent. Infosys closed flat while Satyam closed a per cent lower.

Zee Tele, GAIL and Hindalco were the biggest gainers on the Nifty while MTNL, Punjab National Bank and Reliance Energy were the major losers.

The US indices gave up some of the gains of last two weeks in yesterday's trade on fresh worries about corporate profitability. The markets ignored a further decline in crude prices and an unexpected improvement in US trade deficit as well as a drop in inflation. The major indices saw one of their worst declines in recent months.

While the Dow closed well over three-fourths of a per cent lower yesterday, the S&P 500 also lost three-fourths of a per cent. Technology stocks were less affected by the decline and NASDAQ closed the day with losses of half- a-per cent.

Most Indian ADRs also closed lower in line with the general market trend yesterday. The weakness was very much visible in technology ADRs, all of which closed with losses. While Wipro and Infosys closed with losses of well over a per cent each, Satyam closed marginally lower. Among the telecom stocks, MTNL lost close to 2 per cent and VSNL lost over half-a-per cent.

ADRs of ICICI Bank and HDFC Bank managed to close with gains yesterday. While Tata Motors closed flat, Dr. Reddy's gained a quarter-of-a- per cent.

NYMEX crude futures for October delivery declined below $63 to a barrel for the second day yesterday before recovering and closing at $63.11, half-a- per cent lower than the previous close. The commodity is trading with gains of over half-a-per cent in early European trades today.

ONGC Videsh has lost the bid to acquire the assets of Encana in Ecuador. According to news reports, CNPC of China has acquired the oil and pipeline assets for over $1.4 billion. ONGC reportedly withdrew its bid on concerns about a dispute with the government of Ecuador over certain transactions of Encana. ONGC closed a per cent lower.

The natural gas reserves at a field off the Orissa coast, part-owned by Reliance Industries, are reportedly double the earlier estimates. An independent agency has certified the reserves at 2.3-trillion cubic feet, according to news agency reports. The stock lost over one-and-a-half per cent.

The huge rally in stocks of SBI associate banks yesterday sparked off a rally in SBI today. The stock surged well over 2 per cent and crossed the Rs900 levels to a new lifetime high by early afternoon. The surge in stock prices of associate banks would benefit SBI, which holds majority stakes in the smaller banks. The stock closed with gains of almost 2 per cent.

According to media reports, a senior official of Fiat has confirmed that the company is in discussions with Tata Motors for cooperation in production, sourcing and technology sharing. There have been frequent reports in the Italian media about a possible collaboration between Fiat and a large Indian auto company. Tata Motors added one-and-a-half per cent.

Fiat India has struggled to make an impact ever since it made its entry in the country in the '90s. The company has large manufacturing capacity lying underutilised as sales numbers have been very low. Tata Motors on the other hand is looking at various sources for technology, especially engine technology. The reports suggest that Fiat and Tata could share the production facilities of Fiat in India and the Italian company would supply its next generation diesel engines to Tata Motors.

Ranbaxy has received US FDA approval for benazepril tablets, used in the treatment of blood pressure. The stock lost half a per cent.

Hindalco was one of the biggest gainers among index stocks in early trades on expectations of a liberal rights issue. The company's board is meeting next week to decide on various options to raise capital, including a rights issue. The company has investment plans worth Rs20,000 crore over the next few years including new facilities in Orissa and Jharkhand. The stock added 3 per cent.

Essar Steel has denied that it has concluded a deal to buy steel mills from South Korea. Earlier in the month, media reports had mentioned that the company had concluded the deal for $100 million and the plant would be relocated to India.

According to media reports, Dr. Reddy's is planning a major foray into bio generics. The company has reportedly tied up with US-based Gala Biotech to facilitate the new business. The reports suggest that the company is targeting some of the biotechnology products going off patent from 2007 onwards. The stock added over half-a-per cent.

Mid-Cap Action

The weakness in frontline stocks affected mid-caps as well by afternoon. The mid-cap index opened on a healthy note and gained over half-a-per cent by early afternoon before giving up and closing with losses. The losses on the mid-cap index were almost twice as much as that on the Nifty. The CNX Mid-Cap index closed the day at 3811, a loss of 22 points.

Stocks of companies belonging to the Blow Plast group attracted a lot of buying interest after the promoters indicated that they are considering a merger of three companies, Blow Plast, VIP Industries and Univeral Luggage into a single entity. The group may also acquire French luggage company Delsey with which the group currently has a branding deal.

VIP Industries manufactures premium and mid-segment luggage while Universal manufactures lower end products. Blow Plast is the marketing arm of the group. The group is currently the largest luggage manufacturers in Asia. Universal Luggage gained 10 per cent, VIP added 5 per cent and Blow Plast over 3 per cent.

Opto Circuits clarified to the exchanges that it has not concluded any acquisitions. The company confirmed that it is in negotiations to acquire two companies, one in Europe and another in the US. The stock closed lower by almost 3 per cent.

The board of directors of tyre manufacturing company Ceat, a part of the RPG group, are due to meet next week to consider a rights issue. The stock had seen considerable buying interest during the last few days.

Hindustan Dorr Oliver gained 5 per cent in early trades on speculation that the ADAE group is planning to acquire a 15-per cent stake in the company. Construction company IVRCL had recently acquired a 70-per cent stake in Hindustan Dorr Oliver from the Jumbo group. The ADAE group later clarified that there are no proposals to acquire a stake in the company.

Mid-cap software company Infotech Enterprises announced a major order win from a European company. The order is reportedly worth several million Euros and is scheduled to be completed within 18 months. Infotech will employ over 300 developers on the project to provide data management and GIS-related services. The stock soared over 8 per cent after the announcement.

Praj Industries, a turn-key manufacturer of ethanol plants and distilleries, has won an order from Turkey for the construction of a bio-ethanol plant. The order is reportedly worth Rs36 crore.

Cummins India will set up a new assembly line at Pune for low capacity engines and generator sets. The new facility is expected to cost Rs15 crore. The company is a leading manufacturer of diesel engines and a subsidiary of US-based Cummins Inc.

BPO company Hinduja TMT gained over 10 per cent in early afternoon trades ahead of its results announcement. The stock closed 7 per cent higher.

INOX Leisure, a subsidiary of Gujarat Flourochemicals, has entered the movie distribution business by acquiring the rights of six Hindi movies for three circles in across the country. The company is a leading operator of multiplex theatres in the western parts of the country and has reportedly invested Rs5 crore in the distribution business so far.

Trent Limited, a part of the Tata group, would invest Rs100 crore over the next few years to expand its retail store network. The company operates the Westside stores for garments and discount stores under the Star India Bazaar brand. The company would add at least six new stores every year over the next few years. Trent currently has 18 stores across the country. The stock lost 2 per cent.

Usha Martin, Gujarat Ambuja Exports and Thirumalai Chemicals were among the significant mid-cap gainers on the NSE.

India Infoline, Andhra Sugar and HOCL were among the significant mid-cap losers on the NSE.

*Disclaimer: The author does not have any position in 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.

Other articles by Rex Mathew

List of general reports on markets

List of general reports on finance