Markets close with marginal losses after volatile session

After four straight sessions of losses, the markets once again opened on a weak note today. The indices were held down as the weakness in frontline stocks rolled over from yesterday.

Some amount of short covering ahead of tomorrow's derivatives expiry and buying at lower levels led to a recovery and the indices were in positive territory within an hour of opening. The uptrend did not last as fresh selling emerged soon after.

After trying to stabilise for two hours, the markets gave up and slipped sharply as heavy selling was seen in select index stocks. Just when it appeared as if the markets were going to record the fifth day of losses, the recovery came and pushed the indices back very close to yesterday's closing levels.

Recovery in stocks like ICICI Bank, Reliance Industries and ONGC helped the frontline indices towards close of the day.

Sensex closed at 7612, a loss of 4 points, and the Nifty at 2322, also a loss of 4 points. Nifty August futures closed the day at a premium of 6 points to the spot index. September futures closed at a discount of 24 points.

Sun Pharma, Bharti and BHEL were the only stocks on the Nifty, which managed to close with marginal gains while Hero Honda, Colgate and VSNL were the major losers.

The US markets closed lower yesterday as continued strength in crude oil and reports of weakness in the property market kept alive fears of a slowdown in consumer spending. The Dow lost half-a-per cent while the S&P 500 and NASDAQ closed with losses of one quarter of a per cent each.

Crude futures for October delivery staged a recovery in the afternoon after trading lower in morning trades yesterday. The commodity closed with marginal gains at $65.71 on the NYMEX yesterday. Crude futures are trading well above $66 in early European trades today.

Indian ADR's had a disastrous day in the US markets following the huge fall in the domestic markets. VSNL was the biggest lower, closing well over 5 per cent lower. The other telecom stock MTNL lost over 3 per cent. Banking ADR's, ICICI Bank and HDFC Bank, lost well over 4 per cent each.

Among the technology ADR's, Infosys and Satyam lost close to 3 per cent each while Wipro closed more than a per cent lower. Dr. Reddy's lost more than a per cent while Tata Motors shed over 2 per cent.

The board of directors of Tata Steel has approved the setting up of an integrated steel plant in Jharkhand, the company's second plant in the state after Jamshedpur. The plant would be set up in two phases of 5-million tonnes each at a total cost of over Rs45,000 crore.

The first phase of 5-million tonnes is expected to be completed within four years and the next phase would take a further five years. The company is also evaluating a new plant in the state of Orissa apart from adding another 2-million tonnes of capacity at its Jamshedpur plant. The stock lost close to 2 per cent in today's trade.

In a related development, the government of Jharkhand has rejected the demand of Mittal Steel to allow export of iron ore as a pre-condition for setting up a 10-million tonnes per annum steel plant in the state.

Hero Honda, the largest manufacturer of motorcycles in the world, is planning to enter the scooter segment later this year. Sources indicated that the company is planning to price its product below Rs40,000 and is not expecting high volumes initially.

The company's technology partner and major shareholder, Honda, is also present in both motorcycles and scooters on its own. The stock lost over 4 per cent today and was one of the biggest losers among the index stocks.

The world's largest mutual fund, Fidelity, and its subsidiaries have raised the total stake in domestic pharma major Cipla to 5 per cent. The stock gained over a per cent.

Asian Paints is on the lookout for acquisitions in the Middle East and East Asian countries to expand its global operations. The company had acquired Singapore based Berger International in 2003. Asian Paints has a presence in 22 countries and its overseas revenues exceeded $100 million last year.

BHEL has received a fresh order from the government of Haryana for renovation and upgrading of a power station. The order is worth Rs110 crore and will be completed in two years. The stock closed over 2 per cent higher.

Indian Oil is planning to raise the capacity of its Panipat refinery to 3-lakh barrels of crude per day or close to 13-million tonnes per annum. The refinery has a capacity of 1.2-lakh barrels at present, which would be doubled by the last quarter of the current financial year. The company is also considering a naphtha cracker at the same location.

HCL Technologies will set up a dedicated centre for product engineering centre for Hamilton Sundstrand. The centre would come up in Bangalore and would offer engineering design services to Hamilton's operations in the US and Europe. The stock lost close to 3 per cent.

Larsen & Toubro has won a contract to rebuild the cricket stadium at Kensington Oval in Barbados ahead of the cricket world cup scheduled for 2007. The order is reportedly worth over Rs210 crore. The stock gained a per cent.

L&T is also planning to team up with domestic oil majors like ONGC, Indian Oil and GAIL to bid for overseas engineering and construction projects in the petroleum sector. The company already has an agreement with Indian Oil and is negotiating with the other two. Teaming up with oil companies would provide industry expertise to L&T.

Gujarat Ambuja Cements planning to raise $100 million through foreign currency borrowings to retire higher cost debt. The stock closed well over a per cent lower.

Major technology stocks had a bad day as TCS, Infosys, Wipro and Satyam all closed with losses of well over a per cent each.

Mid-Cap Action

Mid-caps could not manage a last hour recovery like the frontline stocks, though they did recover from the day's lows. By late afternoon, the mid-cap index had lost close to 2 per cent as many of the active mid-cap stocks were trading with huge losses. The CNX Mid-Cap index closed the day at 3509, a loss of 43 points.

There are reports that the proposed stake sale by private equity firm Barings in mid-cap software company Mphasis BFL may be delayed or called off. Potential buyers like Temasek Holdings and Hinduja TMT are reportedly finding the price too high. There are market rumours that TCS has re-entered as a bidder.

Titan Industries was one of the few stocks, which closed with good gains in a falling market. The company said its board would meet next week to consider a rights issue. The stock closed with gains of close to 4 per cent.

Mid-Day Multimedia was another stock, which held firm in a falling market. The stock has held firm through most of this market correction, except on Monday. The stock gained ahead of a board meeting to consider preferential issue to FII's and overseas corporate bodies.

Visual Soft was one of the few gainers in the mid-cap space with the stock closing with gains of over 5 per cent. The stock firmed up on reports that Citigroup Global Markets, the investment arm of Citibank, has acquired an additional 1.4 per cent stake in the company taking its total stake close to 6 per cent.