Markets opened on a positive note as heavyweights bounced back and the Sensex rallied more than 50 points. Indices soon lost ground and slipped into the red as selling emerged at higher levels. In the early afternoon trades indices made another attempt to recover but went down again. Sensex closed at 6443, down 11 points and the Nifty at 2015, down 11 points. Nifty futures are quoting at a 3 point premium to the spot index.

US indices gave a mixed trend yesterday with Dow closing with marginal losses and NASDAQ marginally in the positive. Oil lost close to 4 per cent and declined below $54 to a barrel. Indian ADR's continue to bleed with HDFC Bank, Tata Motors, ICICI Bank Wipro and Satyam all ending up with major losses. MTNL and Dr. Reddy's were the only ones to post gains.

Rumors continue to fly around about the impending settlement between Ambani brothers. Reliance group stocks continue to buzz as managements have neither denied nor confirmed the rumors. Even reports that came late in the afternoon about a delay in settlement did not affect the stocks much. Reliance Industries, Reliance Capital and IPCL were all gainers while Reliance Energy ended up with marginal losses. It is also reported that the exchanges may ask Reliance Industries for clarifications. A formal denial by the company could take down these stocks and the market along with them.

Tata Steel is planning to increase prices of HR coil for long term contracts by 20 per cent. The company had kept the prices steady for the last 6 monts or so even as its competitors increased prices. Tata Steel also received a stable rating from rating agency S&P for its overseas debt issue. The stock gained more than a per cent.

Apart from Reliance and Tata Steel, the other gainers among index stocks were SBI and ITC. Jet Airways posted gains of over a per cent.

Among Nifty stocks engineering major ABB was the major loser with losses of more than 3 per cent. MTNL and Cipla also lost ground.

HDFC and HDFC Bank both continued their down trend today. Weakness in ADR prices of HDFC Bank may be adding to the sentiment.

TCS was another major loser with losses of more than 2 per cent. Among other IT stocks, Infosys posted gains while Satyam and Wipro closed with losses.

Mid-cap action

Majority of mid-cap stocks continue to lose heavy ground. Many of the stocks which saw significant gains after the budget have given up most of their gains.

Industrial abrasives manufacturer Carborundum Universal gained substantially as the company announced a board meeting to discuss issue of bonus shares. Besides abrasives, the company also has a small BPO business. The stock gained more than 15 per cent.

Subex Systems announced an order from an African telecom company for its software package. The order size is not yet made public, though the company says it is the largest in its history. The stock gained more than 8 per cent on this news but gave up most of its gains later in the day.

Nagarjuna Constructions jumped more than 7 per cent after it announced a major order received for highway construction from the NHAI.

IDBI and IDBI Bank made smart gains, once again on rumors about their impending merger. Investors would do well to remember that though a merger between these two is good, speculating on the merger ratio and trading on that basis is too risky.

Mid-cap steel stocks were weak once again and some of them lost more than 3 per cent each. The strong run up in these stocks had encouraged many traders to build huge positions in these stocks, financed mostly by brokers. The decline in prices has forced these traders to liquidate their positions thereby putting more pressure on the stock prices. This is just another reminder to small investors about the risks involved in going after momentum.

Bearings manufacturer SKF India lost 10 per cent after its Swedish parent announced the floor price for reverse book building (the parent company buying back shares from other investors) at Rs150, far below the market price. SKF India stock had run up substantially on market speculation about a higher price to be offered. A clear statement from the company earlier would have saved many retail investors a lot of money.

McDowell, Gammon India, Orchid Pharma, HMT, Escorts, etc, were some of the large losers among mid-cap stocks.

With four straight days of losses, the market sentiment is very weak. Every attempt by the indices to stage a rally is meeting stiff resistance. Though a relief rally is expected, it may not sustain for long. The futures and options expiry would add to the volatility next week.

Market: Indices

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