$70 oil pulls down the indices further

Indices opened the day in positive territory but the gains lasted only a moment. As expected, record oil prices and weakness across other Asian markets took their toll and the frontline indices were down almost one and a half per cent within minutes of opening.

Frontline stocks made a slow and steady recovery for the rest of the day as buying emerged at lower levels. While oil and auto stocks were the most affected, select technology stocks like Infosys and telecom major Bharti were among the gainers.

Markets across Asia closed substantially lower on record oil prices. The Japanese and Hong Kong indices lost a per cent each while Taiwan lost well over a per cent. Stocks are down across major European markets in early trades today.

Sensex closed at 7634, a loss of 46 points, and the Nifty at 2338, a loss of 19 points. Nifty September futures closed at a discount of 32 points to the spot index.

IPCL, Bharti and Hindalco were the biggest gainers on the Nifty while BPCL, HCL Technologies and ICICI Bank were the major losers.

Crude futures for October surged over 6 per cent to cross the $70 mark for the first time in early Asian trades as Hurricane Katrina threatens oil production facilities in the Gulf of Mexico. Production from the region, which produces over 2 million barrels a day, is expected to decline by more than 60 per cent.

Some refineries on the US east coast have also been shut down which would put more pressure on the tight supply position. Crude is trading with gains of over 5 per cent at $69.7 per barrel in early European trades today.

According to media reports, Reliance Industries is in negotiations to buy the petrochemical unit of British oil major BP. Last year BP had spun off the unit as a separate subsidiary called Innovene, which is based in the US. According to reports, Reliance completed the due diligence last week and is in the process of making a financial bid.

Innovene has most of its production facilities in Europe and had a turnover of $15 billion, or over Rs65,000 crore, last year. The company is the 5th largest petrochemicals player globally and reportedly has assets of over $8 billion.

If market talk is to be believed, the Reliance bid may be in the region of Rs30,000 crore. If successful, the deal would make Reliance one of the largest petrochemical companies globally.There are also market rumours that Reliance is considering other overseas buyouts in the petrochemicals space, though much smaller than Innovene. The stock closed the day with marginal gains.

There are reports that BPCL has revived its plans to acquire a minority stake in Singapore Petroleum. The PSU oil marketing company has reportedly offered to take a minority stake in Singapore Petroleum in return for the Singapore company taking a strategic stake in the proposed refineries of BPCL. The stock closed almost 4 per cent lower.

ONGC has stated that commercial production of natural gas from the K-G basin would begin by April 2006. The company would also start production at 2 new oil fields in Bombay High next year. The 2 new fields are expected to produce 18,000 barrels of crude per day.

Meanwhile, the government of Kazakhstan has refused to get involved in the sale of Petro Kazakhstan to CNPC of China. The ONGC-Mittal combine was a strong contender and ONGC has been trying various options to help submit a revised bid. With this official statement, the deal looks all set to be finalised in favour of CNPC.

GAIL is planning to start drilling for oil in the Bengal basin in a month or two. The company was awarded the exploration block along with Gazprom of Russia. GAIL would invest Rs600 crore over the next few years for oil and gas exploration. The company is also in discussions to build gas pipelines in Europe.

TCS would seek an exemption from SEBI on last week's revised notification on 25 per cent minimum public holding in listed companies. The public holding in the company is only around 15 per cent and if SEBI turns down the request, TCS would have to increase the public holding within the next 2 years.

Zee Telefilms gained over 2 per cent in early trades on reports that the company has emerged as the highest bidder for cricket telecasting rights. The company was awarded the rights last year but the contract was cancelled later after it was challenged in court. The stock closed with gains of close to 2 per cent.

Mid-Cap Action

Mid-caps were better off following the strong gains on the last 2 days of the previous week. Many of the major mid-cap stocks gained substantially and kept the index from falling as much as the frontline indices. The CNX Mid-Cap closed the day at 3593, a loss of 15 points.

The government may soon allow sugar exports to Pakistan. A decision is expected as early as within a week. The government of Pakistan had allowed imports from India earlier and has reportedly also agreed to receive delivery from India across the land border instead of at a seaport like Karachi.

According to reports, Petronet LNG is in negotiations with RasGas of Qatar for import of an additional 2 million tonnes of LNG. RasGas is already committed to supply 5 million tonnes per annum at Petronet's Dahej terminal and 2.5 million tonnes at the proposed Kochi terminal.

The board of directors of United Western Bank has approved a bonus issue in the ratio of one share for every 5 shares held. The board has also approved a rights issue in the ratio of 1 share for every 2 shares held at Rs24 per share.
Aftek Infosys would acquire a large stake in US based V-Soft, which offers engineering solutions. Aftek has an option to fully acquire the company over the next 4 years.

Small-cap software company Virinchi Technologies has agreed to buy Ksoft for $2.66 million in cash and stock. KSoft is a provider of business intelligence and SAP implementation solution. The combined entity is expected to post a top line of Rs33 crore for the current year.