Indices decline further in volatile trade

22 November 2005

The markets have started experiencing considerable volatility ahead of the derivatives settlement due on Thursday. Though the US markets closed in the positive yesterday, most Asian markets opened with losses today. The results of the recent Bihar assembly polls added to the uncertainty.

The indices opened in the negative and slipped more than half a per cent each in morning trades. After remaining sideways, the indices started a recovery as reports suggested a decisive electoral mandate in Bihar.

Helped by the technology stocks, the indices clawed back to positive territory in early afternoon trades. But the sell-off came quick and the markets slipped deep into the red within a short period.

By the last half hour of trade, the indices had lost over a per cent each and there were no attempts at recovery. They closed near the lows of the day.

Banking stocks were among the worst hit today. OBC was the biggest loser among index stocks, closing more than 4 per cent lower. PNB lost more than 3 per cent while SBI closed nearly 2 per cent lower. ICICI Bank gave up its gains and closed lower. HDFC lost around 2 per cent.

ONGC declined close to 3 per cent, exerting considerable pressure on the indices.

Jet Airways, SCI and BPCL were among the other losers in index stocks.

Sensex closed at 8535, a loss of 76 points, and the Nifty at 2573, lower by 30 points. Nifty November futures closed at a discount of 4 points to the spot index.

Glaxo, L&T and Tata Tea were the major gainers among Nifty stocks while Oriental Bank, Ranbaxy and PNB were the major losers.

US markets rallied from a modest start yesterday and closed with good gains. The indices were helped by strong gains in Boeing, which has announced major order wins recently. The recovery in crude prices helped the oil stocks and the decline in General Motors did not affect the sentiments much.

The Dow and S&P 500 closed with gains of over half-a-per cent each. Gains on the NASDAQ were higher at two-thirds of a per cent.

Indian ADR's had a relatively bad day yesterday as many of them came under selling pressure. Satyam and VSNL were the biggest losers while MTNL and Dr. Reddy closed with gains.

Crude oil prices have staged a mild recovery this week on reports that consumption of heating oil is increasing. Weather forecasts indicate a colder than usual winter in North America which would push up demand further. Crude oil futures for January delivery gained 49 cents yesterday to close at $57.70 on the NYMEX yesterday. The commodity is trading considerably above the $58 per barrel mark in early European trades.

Ranbaxy declined sharply in intra-day trades on reports that Astra-Zeneca has filed a patent infringement suit against the company in a US court. Ranbaxy had filed an ANDA with the US FDA for a drug used in the treatment of ulcers and heartburns. ANDA is the application filed for approval before a drug can be marketed in the US. Astra-Zeneca holds the original patent on the drug, which has been considerably successful in western markets.

BHEL has reportedly commissioned the first of the 4 power units under a Rs1,100 crore order from Libya. Each gas-based unit has a capacity of 150 MW and the entire project is expected to be completed by the middle of next year.

VSNL has announced a tie-up with Microsoft to offer communication services to corporate customers. The two companies would leverage their communication network and software technologies to provide managed communication services.

Mid-Cap Action

Movements in mid-caps were in line with the general markets. They opened weak before recovering in early afternoon trades. Though they slipped again later during the session, the losses were not as much as the frontline stocks. The CNX Mid-Cap index lost 25 points and closed the day at 3731.

Software company KPIT Cummins announced two overseas acquisitions today. The company said it would acquire a majority stake in an US based business intelligence provider for $2 million. The company being acquired is expected to report revenues of $3.5 million this year. KPIT has an option to buy out the remaining stake over the next three years.

KPIT also announced the acquisition of a majority stake in a French offshore consulting company. The cost of acquisition has been reported at Euros 1.75 million, half of which would be paid in cash and the rest in stocks. The French company is expected to report revenues of Euros 3.5 million this year and KPIT has retained the option to acquire the remaining stake over the next two years.

Polaris Software was one of the biggest winners in the mid-cap space. The stock surged by as much as 10 per cent in intra-day trades on speculation that Citigroup may sell its majority stake in the company. There has been considerable market talk about a large global software company taking over Polaris.