Markets close higher after lacklustre trade

Once again the markets opened with a strong positive gap as traders keenly anticipate the 8000-mark on the sensex. The buying was not sustained and the indices declined soon after opening and went into negative territory.

The announcement of the fuel price hike helped the indices to recover towards noon. More selling emerged in early afternoon trades and the indices once again gave up all of the intra-day gains. The last hour of trade saw some buying emerge and helped the indices to close higher.

Sensex closed at 7951, a gain of 26 points, and the Nifty at 2429, a gain of 6 points. Nifty September futures closed at a discount of 4 points to the spot index.

Tata Chemicals, Cipla and Oriental Bank of Commerce were the biggest gainers on the Nifty while Bajaj Auto, BPCL and Dabur were the major losers.

The government finally decided to increase the retail prices of petrol and diesel. The price of petrol goes up by Rs3 per litre while diesel prices would increase by Rs2 per litre. The prices of kerosene and cooking gas have been left unchanged.

The price increase would help the PSU oil marketing companies to recover part of the losses they are incurring now. The government has made it clear that it expects the companies to bear more than half the costs of increase in crude prices. The government is also studying a proposal to issue oil bonds to the marketing companies to compensate for their losses.

Indian Oil said it expects to post a marginal profit during the current quarter ending September after the price hike. The company, like all other oil-marketing companies, had posted losses in the first quarter.

Oil stocks were mixed in today's trade after the announcement. HPCL was the biggest gainer, closing more than a per cent higher. BPCL on the other hand lost well over a per cent. ONGC closed with losses of over half-a-per cent.

Essar Global, a part of the Essar group, has bought two steel plants from South Korea. These plants are to be dismantled and shipped to India where they are expected to be reassembled by Essar Steel.

The two plants have a combined capacity of 2.5-million tonnes per annum. The plants were acquired at a cost of $100 million.
Among the frontline stocks, ITC, ICICI Bank and SBI were the major gainers.

Mid-Cap Action

Mid-caps were lacklustre today and the market breadth turned negative. The index struggled to stay in positive territory throughout the session as selling pressure emerged across many sectors. The CNX Mid-Cap index closed the day without any change at 3726.

Institutional buying was seen in GE Shipping, which had announced a de-merger of its offshore services division recently. Institutional investors expect the division to fetch good valuations when it is listed separately as offshore services are much in demand because of high oil prices. The stock closed with gains of over 5 per cent.

Cyber Media gained well over 10 per cent to close at a new lifetime high after the company announced a new tie-up with a large
US-based media company. The stock has seen considerable appreciation over the last few days.

Satnam Overseas, a leading rice exporter, has raised $20 million from an FCCB issue. The zero coupon bonds would be listed on the Luxembourg Stock Exchange and are redeemable after five years.

Garment retailing company Provogue surged today on reports that its promoter has been released from police custody on bail. The person was arrested on charges of drug trafficking.