Indices correct on weak global markets and profit booking

29 November 2005

If global cues were perfect to take the indices to record levels yesterday, today they were weak enough to induce a correction in the markets. US markets had closed weak yesterday and all Asian markets followed the trend today. The fall in oil prices could not lift the sentiment as most markets had run up considerably over the last week.

After opening marginally in the positive, the indices slipped rapidly and within a few minutes were trading with losses of nearly a per cent each. After trying to consolidate, the indices declined to their lows of the day in mid-morning trades. The Sensex went below 8900 and the Nifty went close to 2680.

Just when most traders were expecting further weakness, the indices made a smart recovery in afternoon trades. The Sensex regained over 90 points from the lows of the day and the Nifty did even better in percentage terms.

The recovery did not sustain and the markets slipped once again in late afternoon trades. However, buying at lower levels helped the indices and they closed above the lows of the day posted in morning trades.

Engineering and capital goods stocks declined today after many days of substantial gains. BHEL was one of the biggest losers among index stocks closing more than 3 per cent lower. L&T recovered from losses of over 2 per cent and closed marginally lower. Siemens rallied in early trades and posted a new lifetime high before declining and closing 1.5 per cent lower. ABB lost over 2 per cent.

Auto stocks gave up part of the gains from the previous sessions. Maruti, M&M and Bajaj Auto lost over 2 per cent each. Tata Motors lost close to 2 per cent while Hero Honda closed a per cent lower.

FMCG stocks also saw some profit booking with HLL closing more than 2 per cent lower. ITC lost over a per cent. Dabur lost close to 3 per cent.

Most frontline technology stocks were weak with the exception of Satyam and HCL Tech. The stock saw a late surge and closed over 1.5 per cent higher. HCL Technologies added nearly 2 per cent. Infosys gave up nearly a per cent while TCS and Wipro also closed lower.

Reliance Industries was a surprise winner in early trades today after remaining subdued for most of last week. The stock gained over 1.5 per cent on expectations that the de-merger scheme would go through smoothly at the High Court. It could not sustain the gains and closed the day on a flat note.

Pharma stocks made a come back, led by Ranbaxy. The stock remained strong throughout the session and closed with gains of close to 2 per cent. Sun Pharma gained over a per cent.

Steel stocks remained firm in today's weak market. Tata Steel closed with gains of nearly a per cent while SAIL closed flat. Among aluminium stocks, Nalco lost close to 2 per cent while Hindalco closed with marginal losses.

Sensex closed at 8931, a loss of 64 points, and the Nifty at 2698, lower by 14 points. Nifty December futures closed at a premium of 8 points to the spot index.

Gail, Reliance Energy and Ranbaxy were the major gainers among Nifty stocks while BHEL, VSNL and Dabur were the major losers.

US markets broke a 7-day rally yesterday even though most retailers reported a good start to the holiday shopping season.

However, markets are worried about the impact of price discounts on profitability. Another report indicated a decline in existing home sales, which was interpreted as the initial signs of the property market cooling off. The drop in crude prices led to a fall in oil stocks, adding to the pressure on the indices.

The Dow lost over a third of a per cent while the S&P 500 lost close to a per cent. Weakness in technology stocks saw the NASDAQ index losing over a per cent.

Indian ADR's had a weak day yesterday as most of them closed in the red. Infosys and HDFC Bank were the major losers, closing around 1.5 per cent lower. VSNL added more than 3 per cent while Tata Motors closed a per cent higher.

January crude oil futures on the NYMEX lost $1.35 per barrel yesterday on indications that demand for heating oil may not be as high as expected. Oil futures closed at $57.36 per barrel. In early European trades today, crude has lost another per cent and is trading below $57 per barrel.

Tata Motors is planning to set up a design centre in the UK for passenger cars. According to media reports, the centre would focus on research, design and development of passenger cars. Other Tata group companies like TCS and Tata Technologies may also be involved in the project.

HCL Technologies has announced that it has launched a new statistical software package in association with a Japanese company. The package would be useful for pharmaceutical companies engaged in primary drug research.

Mid-Cap Action

Mid-caps also came down in the morning session along with the frontline stocks before recovering part of the ground in afternoon trades. Though there was no large sell off, most of the gainers from the previous week lost between 1 and 2 per cent each. The CNX Mid-Cap index lost 18 points and closed the day at 3843.

Voltas is in the final stages of closing down its refrigeration equipment division in Hyderabad. The company is in the process of valuing the residual assets before a sell-off.