Indices manage a smart comeback after early jitters

21 October 2005

Yesterday when the global markets did well, Indian indices had another disastrous day. Today when the global cues were negative with US markets closing with considerable losses and indices across Europe opening weak, the Indian indices rallied strongly. Asian indices had a relatively better day after a modest opening, with Korea leading the pack.

Tata Power roared back after yesterday's hammering following the results announcement. The stock was the best performer among index stocks closing almost 8 per cent higher. Reliance Energy, another power utility, added over 3 per cent.

Bharti Tele added more than 5 per cent after the government finally approved the hike in FDI limit to 74 per cent for the telecom sector. VSNL was another telecom stock which managed a strong recovery. The stock added close to 7 per cent.

Hero Honda surged after some very bullish statements from the management yesterday, regarding volume sales for the rest of the year. The stock added more than 6 per cent. Bajaj Auto closed a per cent higher.

Among the other auto stocks, Maruti gained close to 4 per cent. Tata Motors added 2 per cent while M&M closed a per cent higher.

Reliance Industries remained firm throughout the session and closed with gains of 3 per cent. Group company IPCL added close to 4 per cent. ONGC closed nearly 2 per cent higher.

ITC staged a smart comeback from a one-way downtrend and closed 4 per cent higher. HLL added close to 2 per cent.

Wipro was the best performer among technology stocks, adding over 4 per cent. Satyam and TCS added a per cent each while Infosys closed half-a-per cent higher.

Zee Tele was the biggest loser among index stocks as the counter faced heavy selling pressure following disappointing results declared yesterday. The stock opened weak and did not even make an attempt at recovery when the markets rallied. Zee closed with losses of over 7 per cent.

Ranbaxy was another big loser after the company announced worse than expected results for the quarter. The stock closed more than 3 per cent lower.

Other pharma stocks led by Sun Phama managed to close the day with gains. Sun added close to 5 per cent while Dr. Reddy closed one-and-a-half per cent higher.

Sensex closed at 8069, a gain of 134 points, and the Nifty at 2444, higher by 48 points. Nifty October futures closed at a discount of 2 points to the spot index.

Tata Power, VSNL and GAIL were the few gainers among Nifty stocks while Zee Tele, Ranbaxy and HDFC were the major losers.
The recovery in US markets lasted only a day as yesterday the frontline indices gave up all their gains from the previous day.

Economic data released yesterday showed that inflation levels have inched up to a 25 year high, causing widespread fears of interest rate hikes. Quarterly results from Pfizer were disappointing and affected the entire healthcare sector. Further decline in crude oil prices pulled down oil stocks as well.

The Dow closed with losses of one and a quarter of a per cent, giving up exactly what it gained on Wednesday. The S&P 500 gave up one and a half per cent. The NASDAQ lost over a per cent, retaining part of Wednesday's gains.

Crude oil futures declined over 2 per cent yesterday as concerns over lower fuel inventories have disappeared for now and the latest storm is expected to miss oil targets. Crude futures for November delivery lost $1.38 cents per barrel to close at $61.03 yesterday after sliding closer to $60 in intra-day trades. Crude oil futures for December delivery has is trading below $60 per barrel in early European trades today.

Pharma major Ranbaxy announced disappointing results for the quarter ended September. The company faced considerable price erosion in the US markets though European sales were better. Ranbaxy said litigation costs were considerably high during the quarter.

Ranbaxy's third quarter profits dropped to Rs18 crore from Rs200 crore during the same quarter of previous year. Total revenues for the quarter were marginally lower at Rs1,352 crore as compared to Rs1,368 crore during the previous year quarter.

The results of Ranbaxy were much worse than market expectations. The substantial drop in profits despite higher other income and a tax write back made the results all the more poor and the stock was beaten down substantially. The company's shareholders have approved a proposal to raise up to $1.5 billion from an overseas issue.

Meanwhile European drug major Roche has announced that it would start discussions with 4 generic drug manufacturers, including Ranbaxy, for production of anti-bird flu drug Tamiflu. Demand for the drug is soaring as the virus is being detected in many more countries and Roche is strugglicng to meet the demand. Indian company Cipla had announced that it can produce a generic version of the drug at short notice.

The board of directors of State Bank of India has approved a secured bond issue to raise up to Rs3,300 crore. SBI informed the exchanges that the issue would be privately placed and would have a maturity of 5 years.

ONGC said it would pursue oil and gas assets in the Central Asian region, particularly Kazakhstan. A consortium led by ONGC had lost the bid to acquire a controlling stake in Petro Kazakhstan.

According to news agency reports, Tata Power would invest up to Rs15,000 crore over the next 5 years to set up coal based power plants. The company had recently signed an agreement with the government of Jharkhand to set up multiple coal-fed projects with a total capacity of 3,000 MW. Tata Power is also planning a 1,500 MW plant in Maharashtra.

Oriental Bank of Commerce reported a lower net profit for the quarter ended September. Profits at Rs165 crore was more than 20 per cent lower than Rs215 crore reported during the previous year quarter. Total income was higher at Rs1,180 crore as against Rs919 crore.

The central government approved the merger of petroleum retailer IBP with Indian Oil. IBP is currently a subsidiary of Indian Oil. For the second quarter Indian Oil is expected to break-even though IBP would still make losses as it does not have any refining operations to cushion the retailing losses.

Mid-Cap Action

Mid-caps were much more volatile than the frontline stocks. The index opened weak and was trading with losses till afternoon when it started to recover. Even then gains on the mid-caps were much lower than the frontline stocks. Some of the popular momentum stocks surged in late afternoon trades. The CNX Mid-Cap index added 48 points and closed the day at 3538, a gain of close to one-and-a-half per cent.

Software company Polaris has reported a profit of Rs13.25 crore for the quarter ended September as compared to Rs17.25 crore during the previous quarter. Total revenues for the quarter were higher by 7 per cent to Rs216 crore as against Rs201 crore during the previous year.

However as compared to the first quarter of the current year, Polaris has managed to increase profits by 14 per cent and revenues by around 4 per cent. The results were below expectations and the stock lost considerable ground in today's trade.

Automotive battery manufacturer Exide Industries has reported a net profit of Rs29 crore for the quarter ended September as against Rs20 crore during the same quarter of previous year. Revenues for the quarter were higher by more than 10 per cent at Rs339 crore as against Rs307 crore during the previous year. The company said it would be able to maintain the performance in the coming quarters as lead prices, a major input, are expected to stabilise at the current levels.