Indices crash in afternoon trades after strong opening

The day was ripe for a sharp bounce back for the markets as stock markets across the globe recovered from the recent weakness. The US markets had seen their best daily gains in recent months yesterday and all Asian markets closed with gains today.

The Indian markets joined the global trend and opened the day on an extremely strong note. After opening with a huge positive gap, the frontline indices were trading with gains of well over one-and-half per cent each within minutes. The Sensex added more than 140 points to go past the 8100 mark within the first half hour of trade.

Though the indices came down from their early highs in mid-morning trades, they were comfortably placed with gains of well over a per cent each. Then came reports of massive selling by FII's in the futures segment yesterday. Reports that FII's made net sales of over Rs1,500 crore in Nifty futures pulled down the indices and by early afternoon they had given up most of the early gains.

After having given up all the gains, a sense of panic set in among traders as reports of raids by the income tax department at a domestic brokerage company started trickling in. Frontline stocks lost substantial ground as there was no buying support from institutions.

The Sensex declined below the 7850 mark by late afternoon and the Nifty was trading below 2380. Short covering in the last half hour helped the indices to recover part of the losses.

ONGC opened the day on a strong note, but came crashing down in the afternoon weakness. The stock was trading with losses of close to 3 per cent at one point before recovering and closing a per cent lower.

Reliance Industries had a relatively better day and withstood the selling pressure to close with marginal gains.

Companies which announced weak quarterly numbers were among the worst hit. Tata Power closed more than 5 per cent lower on average performance and worries of cost pressure in future.

Zee Tele, which rallied more than 7 per cent in early trades, came crashing down after the company announced disappointing quarterly results in the afternoon. The stock closed almost 5 per cent lower.

Steel stocks continued their downward journey as results from JSW Steel was way below expectations. SAIL lost another 7 per cent while Tata Steel lost close to a per cent. Among the second rung stocks, Ispat Industries lost over 9 per cent while JSW lost close to 8 per cent. Essar Steel lost over 6 per cent.

Banking stocks faced a lot of selling pressure in afternoon trades after opening on a strong note. ICICI Bank, which rallied more than 3 per cent in early trades, gave up all its gains and closed marginally lower. SBI and HDFC lost more than 2 per cent each. PNB was the biggest loser closing more than 4 per cent lower while HDFC Bank lost over half a per cent.

Some of the companies which reported good numbers yesterday managed to close with decent gains. Reliance Energy added close to 2 per cent.

Auto stocks had a mixed day with Hero Honda being the best performer closing well over a per cent higher. Maruti and Tata Motors closed with losses of close to half-a-per cent each. Bajaj Auto lost close to a per cent.

Technology stocks stood out in today's markets with strong gains. Some foreign brokerages have upgraded the sector in view of the strong quarterly results. The depreciating rupee would also help the software companies to report healthy profits during the current year.

Satyam was the best performer in the technology space after the company reported strong second quarter numbers today morning. The stock opened firm and retained its gains through the afternoon weakness to close the day more than 5 per cent higher. TCS and Infosys closed with gains of over a per cent each. Wipro also closed with gains.

Sensex closed at 7935, a decline of 36 points, and the Nifty at 2395, lower by 17 points. Nifty October futures closed at a premium of 5 points to the spot index.

Satyam, Reliance Energy and Gujarat Ambuja were the few gainers among Nifty stocks while SAIL, Tata Power and Dabur were the major losers.

US markets bounced back strongly on better than expected corporate results. Banking stocks led the surge after good quarterly numbers from Bank of America and JP Morgan Chase. Intel had announced its results, which were above market expectations, after market hours on the previous day. The continued decline in crude prices added to the positive sentiment. The markets were also helped by US Fed data showing increased business activity in September and early October.

The Dow closed with gains of one and a quarter of a per cent, its best daily performance in a month. S&P 500 had its best day in six months, closing one and a half per cent higher. Gains on the NASDAQ were higher at close to one and three quarters of a per cent, its best for three months.

Crude oil futures declined another per cent yesterday as the US weekly inventory data showed an unexpected rise in crude oil reserves. Crude futures for November delivery lost 79 cents per barrel to close at $62.41 yesterday after declining much below $62 in intra-day trades. The commodity is trading with marginal losses at $62.21 per barrel in early European trades today.

Satyam Computers, last among the big four software majors to announce its quarterly results, gave a pleasant surprise to analysts by reporting numbers which were much ahead of expectations. The company reported a 34 per cent increase in total revenues to Rs1,186 crore for the quarter ended September from Rs862 crore reported during the previous year. Profits for the quarter were higher by 34 per cent at Rs237 crore as against Rs177 crore during the same quarter of previous year.

Satyam has revised upwards its guidance for the next two quarters as the company said it is seeing good growth in software services. Revenue guidance for the full year has been raised to Rs4,700 crore, an increase of 30 per cent over the previous year. EPS for the full year has been projected at between Rs29.12 and Rs29.23, an increase of 30 per cent from previous year figures.

TCS has announced the acquisition of an Australian software company in the core banking solutions space. The acquired company, Financial Network Services, reportedly has some large banks in Australia as its customers. FNS reportedly had revenues of $30 million during the previous year. The deal is an all-cash deal and would cost TCS $26 million.

TCS said the acquisition would help in strengthening its abilities in the banking solutions space. TCS is already implementing core banking solutions for some of the large PSU banks in India. The core banking space is currently dominated by Infosys and smaller companies like I-Flex.

Hero Honda reported a profit of Rs234 crore for the quarter ended September, higher by 22 per cent as compared to Rs194 crore reported during the previous year. Total revenues were higher by 23 per cent at Rs2,209 crore as against Rs1,798 crore for the same quarter of previous year.

Hero Honda said demand during the current festive season is exceptionally strong and expects to sell 400,000 units in October, the best ever monthly performance for the company. Though the demand is expected to decline in the subsequent months, the company is planning to sell close to 3-million units during the current financial year.

Maruti would invest over $450 million to increase its capacity to 1-million units per annum by the year 2010. The total passenger car market is expected to touch 2-million units by then and the company said it wants to retain a 50-per cent market share.

The company is already working on an expansion plan to take its installed capacity to 600,000 units per annum within a few years. The company is already producing close to 600,000 units, though its installed capacity is much lower. Part of this additional capacity is being set up by a JV with parent company Suzuki in which Maruti holds 70 per cent.

VSNL said it would roll out its South African operations by the first quarter of next year. VSNL holds a 26-per cent stake in the South African venture with some local groups holding the rest. The consortium would offer voice and data services over fixed lines. VSNL would have management control of the venture though its stake is limited to 26 per cent under existing laws in South Africa.
IDBI reported a net profit of Rs131 crore after exceptional items for the quarter ended September. Total income was at Rs1,568 crore. The results are not comparable as the institution merged with IDBI Bank this year and the reported numbers are for the combined entity. The results were way below expectations and IDBI was one of the major losers today.

Mid-Cap Action

Mid-caps also had an extremely volatile ride today as they followed the action in frontline stocks. The index opened on a very firm note and had soared almost 2 per cent in early trades. The decline in afternoon trades was equally sharp as many of the active stocks came crashing down. The index declined close to 2 per cent by late afternoon before recovering part of the losses in closing minutes. The CNX Mid-Cap index lost 50 points and closed the day at 3489, a loss of close to one-and-a-half per cent.

Credit rating agency Crisil reported a profit of Rs14 crore for the quarter ended September as against Rs5.35 crore during the previous quarter. Total income was higher by close to 75 per cent at Rs52 crore as against Rs29 crore reported during the previous year. The company is majority owned by international credit rating major S&P. Crisil has signed an agreement with SBI to offer credit rating services to the small scale sector. The stock added more than 5 per cent.

Software company KPIT Cummins reported consolidated revenues of Rs77 crore and net profits of Rs7.6 crore for the quarter ended September. The company has given a full year revenue and profit guidance of Rs308 crore and Rs32 crore respectively on the lower side. The stock was one of the star performers in the mid-cap space, closing with gains of over 11 per cent.

Opto Circuits, a leading exporter of medical equipment, has signed an agreement to acquire a European company. The company being acquired is a manufacturer of coronary stents. The acquisition would cost Opto Circuits Rs60 crore.