Led by a smart rally in Reliance Industries and broad recovery in oil and gas stocks, the indices posted yet another lifetime high today. The Sensex managed to close well above the 7700 mark comfortably.

Markets opened with a positive gap though banking stocks, which led the market over the last 2 weeks, continued to be weak. The lead was taken over by oil stocks. Auto stocks continued their good run while technology stocks also made some gains.

Sensex closed at 7669, a gain of 34 points and the Nifty at 2354, a gain of 36 points. Nifty August futures discount to the spot index narrowed marginally to 6 points from yesterday's 8 points.

HCL Technology, GAIL and Tata Motors were among the major gainers among Nifty stocks while ICICI Bank, HLL and Ranbaxy were the major losers.

Weakness in bond markets which pushed up bond yields and rising oil prices led to a marginally weak closing for the Dow index yesterday. Strength in technology stocks helped the NASDAQ to close in positive territory.

Crude oil futures for September delivery on the NYMEX rose well over a per cent yesterday to close at $61.57 to a barrel. Oil futures rallied on fears of political instability in Saudi Arabia after the king's death.

Indian ADR's had a mixed day yesterday as some of them came under severe selling pressure. MTNL closed the day with losses of over 5 per cent while ICICI Bank was lower by close to 4 per cent. Wipro, HDFC Bank and Infosys were the other losers. Among the gainers, Tata Motors and Dr. Reddy's closed around 2 per cent higher while VSNL gained well over a per cent.

Reports that the government has decided to issue bonds to PSU oil companies to offset their subsidy burden led to a sharp rally in shares of oil marketing companies. According to these reports government would issue bonds to these companies, which can be redeemed at a future date.

All the 3 major oil-marketing companies Indian Oil, HPCL and BPCL had reported losses for the quarter ended June '05 as the government refused to increase retail fuel prices to offset the rise in crude oil prices. The proposed scheme of issuing bonds in lieu of the under recovery in retail prices would shift the subsidy burden from these companies to the government.

One of the major beneficiaries of these reports was Reliance Industries, which rallied strongly to close with gains of close to 5 per cent. The company's market capitalisation crossed the Rs100,000 crore mark, making it the first private sector company and second after ONGC among all companies to reach this significant valuation mark.

There have been considerable market speculation and media reports over the last few months about the government forcing Reliance to share the subsidy on fuel. These reports had kept the stock subdued despite a very strong performance during the first quarter. If the proposed oil bond scheme is approved, all speculation about a subsidy impact on Reliance would rest.

All round buying was seen in all the 3 PSU oil marketing companies today. Indian Oil gained over 5 per cent while BPCL and HPCL closed the day with gains of over 4 per cent each.

Among other oil sector stocks, ONGC recovered from a slow start to close with gains of well over a per cent. GAIL was higher by over 5 per cent.

Buying interest was considerable in stand-alone refineries as well. MRPL closed the day with gains of almost 10 per cent. Kochi Refineries closed almost 8 per cent higher while Chennai Petroleum was higher by well over 6 per cent. Bongaigaon Refineries also closed the day with gains of close to 5 per cent.

The PSU oil companies have reportedly received an in-principle nod from the oil ministry to unload their cross-holdings in each other. The decision now needs to be approved by the cabinet.

ONGC, Indian Oil and GAIL have significant holdings in each other and unloading them in the market can help these companies to shore up their financial resources considerably. Indian Oil, for example, holds close to 10 per cent of ONGC which can fetch over Rs14,000 crore.

Similarly, ONGC holds around 10 per cent in Indian Oil and 5 per cent in GAIL. GAIL in turn holds over 2 per cent in ONGC and Indian Oil owns close to 5 per cent of GAIL.

GAIL would form 3 joint ventures with China Gas to sell CNG and piped gas in eastern China. GAIL holds a 10 per cent stake in China Gas. GAIL is also believed to be exploring partnership opportunities with Chinese state owned oil company SINOPEC.

NTPC is planning to enter the nuclear energy business to expand its generation capacity. The company is also looking at hydel projects, as the coal reserves in the country are not expected to last more than another 50 years. As per current plans, NTPC would double its generation capacity to 56,000 MW over the next decade.

NTPC has commissioned the 6th 500 MW unit at its Talcher super thermal power plant. The total capacity of this unit now stands at 3,000 MW. The stock closed with marginal gains.

After acquiring 2 global telecom network companies, VSNL is now looking at possible acquisitions to expand its services business. The company is evaluating potential opportunities both within the country and overseas. The stock closed with marginal gains.

Ranbaxy would build a new manufacturing plant in Malaysia to meet the demand in the ASEAN region. The stock closed lower after yesterday's 9 per cent rally.

After the left parties struck down finance ministry's proposal for consolidation among PSU banks over potential job losses, the ministry is now believed to be encouraging PSU banks to take over weak private banks. The ministry has reportedly asked the RBI to come up with a list of weak private banks, which could be takeover targets.

Asian Banker journal has selected ICICI BANK as the second best retail bank in Asia. The bank was also selected as the best retail bank in India. The stock lost over 3 per cent in today's trade.

Mid-Cap Action

Mid-caps led the frontline stocks through out the day as many of the active stocks posted strong gains. Mid-caps have regained some of the trading interest over the last 2 days after being subdued for over a week till last Friday. The CNX Mid-Cap 100 index closed the day at 3487, a gain of 58 points.

RBI has reportedly disallowed the plans of Bank of Rajasthan to sell up to 15 per cent stake to a strategic partner. The bank was in negotiations with foreign banks including BNP Paribas and Societe Generale for the stake sale.

According to these reports, RBI will allow only a 5 per cent stake sale in the private bank. This could affect the capital raising plans of Bank of Rajasthan, which was planning to raise up to Rs1,000 crore in fresh capital.

Construction company IVRCL Infrastructure has decided to raise its open offer price for shares of former Jumbo group company Hindustan Dorr-Oliver to Rs182 from Rs146.5 per share earlier.

The board of directors of Jubilant Organosys have decided to raise the FII investment limit in the company to 45 per cent of capital. The board also decided to raise Rs109 crore from private equity firm General Atlantic at a price of Rs1,100 per share.

BPO services company Hinduja TMT reported a 44 per cent drop in first quarter profits as revenues declined by 8 per cent as compared to the same quarter of previous year.

Birla Ericsson, Searle India and Surya Pharma were among the best performing stocks among mid-caps.

Skanska Cementation, GKW and Shiva Texyarn were among the significant mid-cap losers.

*Disclaimer: The author does not have any position in 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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