Not many expected the markets to resume their rally today after yesterday's mild correction. US markets tumbled yesterday and most Asian markets had opened weak in the morning. Though the monsoon is showing signs of progress, it is late by over a week, and rainfall in June has been much lower than normal.

The opening went as per script, with both the Sensex and the Nifty declining close to half per cent each. The recovery came fast enough, surprising most by its refusal to give in, initiating an up trend.

The indices maintained a steady up trend till the closing minutes on a mix of fresh buying and short covering. The rally was supported by ONGC, TCS and HLL. Some recovery in Reliance Industries towards noon also helped the indices.

The last half hour saw a fair amount of volatility as the indices came down substantially from the highs of the day. However, the indices managed to recover and close with decent gains.

The Sensex closed at 7149, up 29 points, while the Nifty closed at 2194, up 10 points from yesterday's close. Nifty June futures discount to the spot widened marginally to 16 points from yesterday's 15 points.

Among Nifty stocks, Tata Tea, HLL and Hero Honda were the major percentage gainers while Gujarat Ambuja, Satyam Computers and SCI were the major losers.

US markets were spooked by the continuing rise in crude oil prices yesterday. Traders decided to take profits after last two weeks' gains, on renewed worries of high fuel prices affecting consumer spending.

The Dow lost over one and a half per cent, while the S&P 500 and NASDAQ lost over a per cent each.

The near month crude oil futures touched the $60 to a barrel mark for the first time ever yesterday. Crude futures for August delivery closed on the NYMEX at $59.42, a gain of more than 2 per cent over the previous day's closing. The commodity is trading with gains of half a per cent and is inching towards $60 in early European trades today.

Except Tata Motors, none of the Indian ADR's could hold firm in the sharp fall in US markets yesterday. The tech stocks were the worst hit with Infosys, Wipro and Satyam all closing with losses of well over 2 per cent each. HDFC Bank, ICICI Bank and VSNL also ended with losses of over a per cent each. MTNL and Dr. Reddy's closed with marginal losses. Tata Motors, which had seen some decline in the last two weeks, gained around 2 per cent.

Inflation, for the week ended 11 June, inched up marginally to 4.33 per cent from 4.22 per cent reported for the week before on higher food prices.

There are reports that the oil ministry has cleared the proposed ONGC petrochemical complex to be located at Mangalore, Karnataka. The company had proposed the investments more than a year ago and there were frequent reports that the ministry was against the diversification move.

The ministry had taken the stand that ONGC should stick to its core business of exploration and should not try to become an integrated petroleum and petrochemicals company. Now that the proposal has been cleared, it will go to the PMO for final approval before coming up for cabinet consideration.

There are also reports of ONGC striking a new gas discovery in the Krishna-Godavari basin. Record high crude prices have kept the stock on an up-trend for the last couple of weeks. The stock gained close to 2 per cent.

Reliance Capital has been buzzing ever since the announcement of the Ambani settlement last weekend. Anil Ambani has announced an open offer for 20 per cent of the company at Rs231 per share. But the share price is way above the offer price and touched a new all time high of Rs345 today and closed with gains of well over 10 per cent.

The latest buzz is that the company has received bids for over $1 billion from overseas investors for a proposed preferential issue. The company is planning an issue of only $75 million and the strong interest from foreign investors have encouraged traders to speculate on continued FII buying in the stock even after the offer.

Even after considering the interest from foreign investors, it is surprising to see the stock trading almost 50 per cent above the offer price. It will be a bit too far fetched to hypothesise that the acquiring parties would hike the offer price by over 50 per cent. Also, the rumour that the company may get a banking license soon may remain just that - a rumour.

Hero Honda is planning to set up its third assembly line in South India. The stock closed with gains of close to 4 per cent.

According to reports, IDBI is conducting due diligence on IFCI and on the basis of this it would arrive at a decision on a possible merger. During the day, IDBI denied the reports and said it was too early to talk about the merger. IDBI lost over 6 per cent in today's trade.

IFCI may offer a fresh round of VRS to its employees to reduce the workforce and improve the bottom line before any merger. The financial institution has gross non-performing assets of a massive Rs12,000 crore on its books.

In the last one year, IFCI has been fairly sucessfull in recovering a part of these losses and the process continues. A few years back, there was a proposal to merge IFCI with the Punjab National Bank, which had met with considerable opposition.

FMCG stocks were the stars of today's trade with all the frontline stocks from the sector posting significant gains. Heavyweight HLL maintained a steady up-trend throughout the day and gained over 5 per cent by close.

Among other FMCG stocks, Tata Tea also gained over 5 per cent followed by Colgate with over 2 per cent and ITC with close to 2 per cent.

Mid-cap action

Many mid-caps continue to see large block deals as FII's continue mopping up large blocks of good quality stocks. The mid-cap index too opened on a weak note but outperformed the frontline stocks for the rest of the day. CNX Mid-Cap 200 index closed at 3029, a gain of 22 points.

There are reports that Kinetic Motors would offer a 20 per cent stake to foreign investors through a preferential issue. The company is hiking its authorised capital to enable the issue.

Kinetic recently launched a new range of premium scooters imported from Italjet. It had also launched high end imported motor cycles from Hyosung of Korea earlier. The stock rallied over 10 per cent in early trades and closed with gains of 6 per cent.

Force Motors, formerly Bajaj Tempo, will launch heavy trucks and trailers imported from MAN of Germany. The stock closed with gains of over 5 per cent on the BSE. Currently, Volvo is the only player in this segment. Tata Motors and Daimler Chrysler are also planning to launch similar products in the near future.

Media stocks saw a lot of action today with many of them flying around. NDTV led the pack with gains of over 7 per cent. Pritish Nandy Communications gained close to 20 per cent while Mid-Day Multimedia also closed with considerable gains.

Most sugar stocks closed with very good gains for the day. Bajaj Hindustan, Balarampur Chini and Dhampur Sugar were among the major gainers.

Another sector which attracted a lot of buying interest today was paper. Most stocks went up on speculation about another round of price hikes. Ballarpur Industries, Orient Paper and TN Newsprint were among the significant gainers.

Rain Calcining, Vindhya Telelink and Asian Electronics were among the best performing stocks among mid-caps.

Ashapura Minechem, Indian Hume Pipe and Suryalakshmi Cotton 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.

Market: Indices

National Markets
Gain (+) / Loss (-)