labels: stock markets - india, markets - general
Rex Mathewnews
13 July 2006


Global cues were highly weak today but the positive sentiment built yesterday helped the markets to resist a substantial fall. Other Asian markets ended with considerable losses following the slide in US indices yesterday and European indices are now trading with substantial losses.

The surge in crude oil prices, possible rate hike in Japan and concerns about corporate profitability are once again affecting global stock markets.

Indices were modestly volatile in early trades as they tried to hang on to yesterday's gains. But profit booking in technology stocks led to a decline and by noon, the indices were trading with substantial losses.

Indices dropped further in afternoon trades before a recovery in the last half hour helped to cut down part of the losses.

Sensex closed with losses of 72 points at 10858 and the Nifty lost 27 points to close at 3169. Nifty July futures ended at a discount of 26 points to the spot index.

Technology stocks saw some correction after rallying substantially yesterday. Infosys opened strong but declined soon after and was trading 4.5 per cent lower at one point. The stock finally closed nearly 4 per cent lower and was the biggest loser among index stocks.

Wipro lost more than 2.5 per cent while HCL Technologies lost nearly 2.5 per cent despite the announcement of a major order win. TCS lost more than a per cent and Satyam ended more than 0.5 per cent lower.

Rising crude oil prices led to further losses for oil marketing stocks. BPCL lost more than 3.5 per cent and HPCL lost nearly 2 per cent.

Reliance Industries gave up half of yesterday's gains and lost more than 2 per cent. ONGC closed with modest losses.

HDFC continued it's down trend and lost more than 3 per cent. HDFC Bank ended nearly 2 per cent lower.

Telecom stocks were weak today as Bharti Airtel lost 3 per cent. MTNL lost nearly 2.5 per cent

Among auto stocks, M&M ended lost more than 2.5 per cent. Hero Honda continued to lose ground and declined nearly 2.5 per cent and Bajaj Auto lost more than a per cent.

Tata Tea was another major loser, despite the rally in Tata Coffee, and closed 2.5 per cent lower.

Tata Power was the best performer among index stocks today. The stock opened firm and sustained its uptrend for the rest of the session and closed nearly 3.5 per cent higher.

Select FMCG stocks came back to prominence and HLL led the way with gains of 2.5 per cent. Dabur added more than 0.5 per cent.

Select metal stocks were firm today, led by Hindalco, which gained nearly 1.5 per cent. SAIL added nearly a per cent.

Among other gainers, Cipla ended with gains of close to 2 per cent each. Grasim, Gail India and ICICI Bank added around 1.5 per cent each.

Global markets / crude oil
US markets tumbled yesterday on concerns that earnings of technology companies would decline faster than expected. Some of the leading brokerages downgraded frontline tech stocks like Apple and Dell. The heavy penalty slapped on Microsoft by the EU also affected the tech sector.

The Dow and S&P 500 indices gave up nearly 1.1 per cent each. NASDAQ index tumbled more than 1.8 per cent. Rising crude oil prices affected the sentiment further.

Asian markets also lost substantially after the decline in US indices. Widely expected rate hike by the Bank of Japan, to be announced later today, also led to the weak trend. Shanghai was the biggest loser, tumbling nearly 5 per cent. Thailand lost nearly 2 per cent while Japan, South Korea, Singapore and Indonesia lost around a per cent each. Hong Kong lost 1.3 per cent.

European markets also opened on a weak note and have declined further. Major indices are trading with losses of nearly 1.5 per cent each.

Crude oil prices crossed $75 yet again as Iran was once again referred to the US Security Council after the country refused to respond fast to a peace package. Near month NYMEX futures closed a per cent higher at $74.95 per barrel yesterday. Sharp decline in US stocks of crude oil and refined products has led to further gains and the commodity is trading close to $76 in early European trades today.

Large-cap news flow

  • HCL Technologies has won a 5-year outsourcing order from Teradyne, a leading supplier of automatic test equipment. HCL would provide consulting, application development and infrastructure management. The base value of the contract is $70 million over the 5-year period, but HCL said this may go up further.
  • Satyam Computer has been adjudged as the second best outsourcing vendor in a global survey of IT and ITES companies. The company improved its ranking from 19 last year.
  • HCL Infosystems has launched a customised personal computer for the BPO and ITES sector. The new systems offer considerable cost savings in initial capital costs to BPO companies.

Mid-Cap Action
Mid-caps and small caps opened firm despite the weakness in large caps. A large number of stocks maintained the uptrend from yesterday and sectors like technology remained in the limelight. After trading with modest gains, mid-cap and small-cap indices declined towards the end of the session.

The CNX Mid-Cap index ended with losses of 9 points, or 0.22 per cent, to end the day at 3912. BSE mid-cap index gained 0.01 per cent and the BSE small cap index ended with gains of 0.08 per cent.

Mid-cap IT stocks rallied for the second day on expectations of strong results. Polaris, Scandent, Visualsoft and Aptech were the major gainers. Aztec Software, which reported a decline in net profits, ended nearly 5 per cent lower.

D-Link, Premier Limited, Tata Coffee, Zicom and S Kumar's were among the other mid-cap gainers.

Hyderabad Industries, FACT, Unichem, Excel Industries, Unitech and Jindal Poly were among the major mid-cap losers.

Mid-cap news flow

  • Tata Coffee has revised the terms of its rights issue. The company would now issue partly convertible debentures of Rs400 each in the ratio of one debenture for every share held. On allotment, shareholders would receive one equity share at Rs250. The balance Rs150 would carry an interest rate of 7 per cent per annum and would be redeemed in 3 annual instalments of Rs50 each from the 4th year onwards.
  • Scandent Solutions has entered into an agreement with real estate consultancy Cushman & Wakefield to develop real estate management software solutions.
  • Stone India has entered into a collaboration agreement with a German company to market inverters, converters and power supply systems for railway coaches and locomotives in the domestic market.
  • McDowell & Co has acquired French wine maker Bouvet Ladubay for a consideration of €14.75 million. The acquired company sold 3 million bottles last year and had revenues of €12 million. McDowell is financing the acquisition from the proceeds of the GDR issue.
  • Dishman Pharma said another Saudi Arabian company has joined as a partner in the proposed project to manufacture API's in Saudi Arabia.

*Disclaimer: The author may have positions in some of the stocks specifically mentioned above at the time of writing this article. This analysis / report is only for the purpose of information and is not an investment advice. Readers are advised to consult a certified financial advisor before taking any investment decisions. While efforts have been made to ensure the accuracy of the information provided in the content the author or publisher shall not be held responsible for any loss caused to any person whatsoever.

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Rex Mathew