Markets lose further ground as volatility continues

Markets continued the volatile behaviour of yesterday into today's trade as well, as traders remained unsure of the short term direction. While economic data and global cues are positive, the doubts about sustained corporate performance are worrying many.

The possibility of liquidity drying up is also weighing in on the markets. Though FII's have pumped in money all through June and first week of July, the possibility of a slowdown and maybe even some selling is not ruled out.

Despite the firm closing by the US markets yesterday and positive opening by most other Asian markets, markets saw a sharp decline immediately after a positive opening. The indices bounced back within minutes and drifted sideways for half an hour before starting their descent again.

After the initial decline the indices turned volatile, making regular attempts to recover lost ground, only to decline again. Weakness in ONGC, Reliance and the tech stocks kept the markets down.

A sharp surge in Reliance late in the afternoon helped the indices to recover most of their early losses as some of the other losers also recovered partly. Rally in ITC also helped the indices. The last half hour saw more selling emerge in technology stocks and the markets slumped again to the day's lows.

Sensex closed at 7188, a loss of 60 points, and the Nifty at 2185, a loss of 19 points. Nifty July futures discount to the spot index widened to 14 points from yesterday's 11 points.

IPCL, Tata Chemicals and Shipping Corporation were among the major gainers among Nifty stocks while VSNL, Zee Tele and MTNL were the major losers.

Helped by earnings upgrades from IBM and HP as well as the decline in crude prices, US markets closed on a positive note yesterday. The Dow gained close to half a per cent while S&P 500 closed almost flat. NASDAQ closed with very marginal gains.

Crude declined a per cent yesterday to close marginally above the $60 mark. NYMEX crude futures for August delivery declined after US weekly inventory data showed an increase in crude stocks.

Among the Indian technology ADR's, Satyam and Wipro managed to recover part of the losses from the previous day. Infosys lost another 2 per cent, taking the total decline over the last 2 days to 9 per cent. HDFC Bank, ICICI Bank, Dr. Reddy's, Tata Motors and VSNL all closed with losses yesterday. MTNL managed to close a per cent higher.

Cement major ACC would invest up to Rs600 crore during the current year to raise capacity. After the expansion, the company's total capacity would increase by over 2 million tonnes to 20.6 million tonnes per annum. ACC had reported a volume growth of 13 per cent during the first quarter of the current year and the company is confident that the growth momentum would sustain.

There is also speculation that European cement major Holcim may raise its stake in ACC to 51 per cent. Currently, Holcim holds a 35 per cent stake indirectly through Ambuja Cements. Gujarat Ambuja Cements holds a 33 per cent stake in Ambuja Cements and the rest is held by Holcim. ACC closed with gains of under a per cent.

After the acquisition of safety match manufacturer Wimco, ITC Limited is reportedly eyeing more acquisitions. According to media reports, the company is the front runner to acquire Karnataka state PSU Mysore Paper Mills. The loss making paper company had posted a turnover of over Rs350 crore last year and would help ITC consolidate its position in the paper board business.

ITC is also believed to be in talks to acquire greeting cards and gifts retailer Archies. Being the only organised player in this segment, Archies could help ITC expand its paper stationary and greeting cards operations. ITC has denied that it is in talks to buy these two companies. The stock closed well over a per cent higher.