Indices tumble after recording new lifetime highs

30 November 2005

Considering the momentum of last few weeks, the markets were well poised for a recovery from yesterday's decline. Despite a marginally weak closing by the US indices yesterday, all Asian indices traded higher today. The Japanese index touched its highest level in almost five years in early trades today.

The indices opened on a firm note and powered ahead in early trades, going past the previous lifetime highs. By mid-morning, both the Sensex and Nifty had posted new all-time highs and looked all set to close the day on a positive note.

The Sensex recorded a new lifetime high of 9034 and the Nifty posted its new high at 2727 in today's trade.

Unconfirmed media reports that the government has asked profit making PSU units to declare higher dividend and those with high reserves to issue bonus shares led to frenzied buying in PSU stocks. BHEL, Nalco and oil company stocks were among the gainers. The news pushed up mid-cap PSU stocks like HMT and ITI as well.
The indices traded in a small range till early afternoon without giving up much ground. Reports that FII's were net sellers to the tune of over Rs300 crore in the derivatives segment yesterday started off the weakness.

However, the speed and extent of the fall in indices surprised all. Within half an hour, both indices slipped into the red. The Sensex declined below 8900 and tried to consolidate at those levels for some time. A fresh wave of selling led to another sharp fall and the Sensex went below even 8800, a fall of nearly 250 points from the highs of the day.

Technology stocks were the worst hit in today's fall. Wipro lost over 4.5 per cent while Satyam closed 3 per cent lower. Infosys and TCS lost nearly 2 per cent each.

Auto stocks, one of the best performing sectors in the recent rally, continued to face pressure today as well. Tata Motors was the biggest loser, declining over 3.5 per cent. Bajaj Auto lost nearly 3 per cent and Hero Honda gave up 2 per cent.

Pharma stocks also had a bad day as Glaxo gave up nearly 4 per cent and Cipla came down by nearly 3 per cent. Ranbaxy gave up close to a per cent while Dr Reddy declined more than 2 per cent.
ONGC and Reliance Industries also came down fast in the sell-off. Both stocks closed with losses of nearly 2 per cent each.

Hindustan Lever and Bharti closed nearly 3 per cent lower each. VSNL and Gujarat Ambuja Cement were the other major losers among index stocks.

Banking stocks were better off, though SBI dropped sharply in afternoon trades and closed 2 per cent lower. Both ICICI Bank and HDFC Bank closed with gains.

Sensex closed at 8789, a loss of 142 points, and the Nifty at 2652, lower by 46 points. Nifty December futures closed at a discount of 6 points to the spot index.

Nalco, HPCL and BPCL were the major gainers among Nifty stocks while Wipro, Glaxo and Tata Motors were the major losers.

US markets gave up all the early gains in afternoon trades yesterday. Reports that new home sales increased during October led to worries that the Fed would continue to raise interest rates as the economy is showing no signs of a slow down. Technology stocks were the worst hit as some of the biggest gainers in recent months like Google and Apple declined on profit booking.

The Dow closed marginally lower while the S&P 500 ended with marginal gains. Weakness in technology stocks pulled down the NASDAQ index by close to one-third of a per cent.

Among the Indian ADR's, ICICI Bank and Satyam were the gainers while Infosys and Wipro lost a per cent each yesterday.

Crude oil continued to tumble yesterday as well on expectation of higher US inventories in data to be released today. January crude oil futures on the NYMEX lost 86 cents per barrel to close at $56.5 per barrel. The commodity declined below the $56 mark in early Asian trades today before recovering part of the losses. In early European trades, crude is trading lower by one quarter of a per cent.

ICICI Bank has set the price band for its proposed mega public issue at Rs505 to Rs545 per share. The issue opens tomorrow and is duie to close on December 6. Retail investors would be issued shares at a discount of 5 per cent to the final issue price.

State Bank of India has launched a subordinate debt issue of Rs1,000 crore to shore up its tier-2 capital. The bank is planning to raise a total of Rs3,000 crore subordinate debt issues in the near future.

Larsen & Toubro has won a new order worth Rs1,000 crore from ONGC. The order is for construction of new wellhead platforms in Bombay High and pipelines to interconnect the platforms.

Siemens India is planning to diversify into engineering services for the oil and gas sector. The company would start participating in overseas oil sector projects being executed by its parent company. Siemens believes the oil and gas sector in India offers significant opportunities for the company to offer engineering services.

Media reports indicate that Sun Pharma has emerged as the front runner to acquire a US based pharma company. The American generic manufacturer has been under bankruptcy proceedings and Sun Pharma has reportedly made a regulatory filing before finalising its bid. The cost of acquisition is over $23 million.