Markets bounce back sharply ahead of derivatives settlement

23 November 2005

Helped by the continuing uptrend in global markets, the indices opened with gains today. US markets maintained the up move yesterday and most Asian markets traded with gains today despite the recovery in oil prices.

After gaining more than two-thirds of a per cent each in mid-morning trades, the indices slipped sharply before noon. Reports that FII's were heavy sellers in the derivatives segment on Monday added to the negative sentiment.

The indices went close to yesterday's closing levels and recovered soon after. By early afternoon trades, they went past the highs of morning trades. After trading within a range till the last half hour, the markets surged ahead in the closing minutes as short positions were covered ahead of tomorrow's settlement.

Auto stocks resumed their rally with M&M taking over the lead. The stock closed with gains of close to 4 per cent followed by Maruti which added over 3 per cent. Tata Motors gained well over 2 per cent.

Among the two-wheeler stocks, Bajaj Auto closed half a per cent higher while Hero Honda added nearly a per cent.

Some of the technology stocks saw a sharp surge in late trades. Both Wipro and Satyam closed with gains of over 3 per cent each. TCS gained over a per cent while Infosys closed marginally higher.

After weeks of indifferent performance, ITC came back strongly and added close to 3.5 per cent. HLL gained over 1.5 per cent.

ONGC gained close to 3 per cent and helped the indices considerably. Reliance Industries closed more than 1.5 per cent higher.

SBI led the banking pack with gains of close to 2.5 per cent. ICICI Bank added well over a per cent while HDFC Bank closed nearly 2 per cent higher.

Gujarat Ambuja Cement, Tata Power and Tata Tea were the other significant gainers among index stocks.

It was a mixed day for pharma stocks as Ranbaxy came under heavy selling pressure. The stock lost nearly 3 per cent. Dr. Reddy's closed a per cent higher.

Steel stocks showed no signs of a recovery as Tata Steel closed more than 2 per cent lower and SAIL ended flat.

Sensex closed at 8638, a gain of 103 points, and the Nifty at 2609, higher by 36 points. Nifty November futures closed at a premium of 14 points to the spot index.

M&M, ITC and Wipro were the major gainers among Nifty stocks while MTNL, Ranbaxy and Tata Steel were the major losers.

US markets continued their rally yesterday as well, recovering from a weak start. Minutes of the last US Fed meeting released yesterday indicated that some of the Fed members are considering an end to interest rate hikes. If the Fed reverses its policy of measured hikes in interest rates, it would be a big plus for the equity markets.

The US markets ignored a pull back in oil prices and the Dow and S&P 500 added another half-a-per cent each. NASDAQ also closed half a per cent higher.

Indian ADR's had a bad day yesterday despite the uptrend in the overall markets. Tata Motors, ICICI Bank and HDFC Bank were the biggest losers. IT stocks continued their down trend as all the three closed with losses.

Crude oil prices continue to trend higher as the winter in North America is widely expected to be colder than normal. Crude oil futures for January delivery gained 2 per cent to close at $58.84 on the NYMEX yesterday. The commodity is trading half a per cent lower in early European trades.

Reliance Industries has received the approval from the Gujarat government for setting up a special economic zone (SEZ) at Jamnagar. The company is planning to set up a 30-million tonnes per annum refinery within the SEZ. Reliance is reportedly in talks with a number of global petrochemical companies to set up downstream units within the SEZ. This would help the company to market the refined products easily.

ONGC said it is planning to set up wind power farms in the states of Gujarat and Karnataka. The equipment would be sourced from Suzlon Energy.

Tata Steel and Blue Scope of Australia has formally signed the agreement to set up a joint venture to produce speciality steels and building products. The new company in which the partners would hold equal stakes is targeting revenues of Rs1,200 crore in 5 years and Rs2,000 crore at full capacity. The manufacturing facility would be set up at Jamshedpur at a cost of Rs1,200 crore.

Bad news continues to flow for Ranbaxy as a US court upheld the injunction granted against Ranbaxy's generic version of Pfizer's hypertension drug. The company has been barred from marketing the drug in the US markets and Pfizer is reportedly in the process of claiming damages. Meanwhile, Ranbaxy is planning an appeal to a higher court.

VSNL is planning to invest $230 million over the next three years to roll out basic telephony services in South Africa. The company would start services by next year, starting with Johannesburg. VSNL holds a 26-per cent stake, the maximum foreign holding allowed, in the consortium which was awarded the license. The company would have management control over the operations.

Larsen & Toubro has received new orders worth Rs252 crore for transmission lines and electric sub-stations. The company said its order book is currently at around Rs21,000 crore which is expected to go up to Rs28,000 crore before the end of the year.

ICICI Bank may reserve 5 per cent of its forthcoming public issue for existing shareholders. The issue price and dates are yet to be announced. The bank has received the SEBI approval for the issue.

Meanwhile, SBI has launched a Rs1,000-crore bond issue to increase its tier-2 capital base. The bonds would have a maturity of nearly 5 years and would pay interest of 7.45 per cent annually. The bonds would be listed on the NSE after the issue.

Essar Steel is expected to come out of the corporate debt restructuring (CDR) mechanism shortly. According to media reports, the company has already paid Rs1,500 crore out of its total outstanding of Rs2,500 to various banks. The company is planning to settle the balance amount shortly. Getting out of CDR cell would enable the company to undertake expansions and acquisitions without the prior permission of lenders.

Mid-Cap Action

Mid-caps were much more subdued today though there was heavy action in select stocks. The mid-cap index underperformed the frontline indices by a wide margin. The index slipped into the red before noon and recovered later in the day. The CNX Mid-Cap index gained 9 points and closed the day at 3740.

Mid-Day Multimedia was the star in the mid-cap space, closing the day locked in the 20 per cent upper circuit. Media reports suggested that BBC is planning to acquire a 20-per cent stake in Mid-Day Radio, a subsidiary offering FM radio services. The company later confirmed that it is talking to potential investors including BBC and no deal has been finalised so far.

The surge in Mid-Day rubbed off on other media stocks as well. TV Today, which has a stake in an FM radio service, closed with gains of over 12 per cent. TV 18 was another gainer, closing nearly 5 per cent higher.