Indices correct marginally as Asian markets turn weak

14 December 2005

An interest rate hike in the US and weak Asian markets finally led to a minor correction in the indices today. Asian markets were generally weak after the interest rate hike by US Fed yesterday on expectations that higher rates in the US would affect investment flows to Asian markets.

However, the day started on a firm note and the Sensex managed to cross 9300 in early trades. After posting new intra-day lifetime highs, the indices slipped in mid-morning trades. The Sensex gave up more than 100 points from the highs of the day.

Sensex recorded a new intra-day lifetime high of 9309 today and Nifty posted its new record at 2826.

Recovery started close to noon and by early afternoon the indices were trading flat. Both indices traded around yesterday's closing levels till the last half hour when they slipped again and closed with losses.

ONGC was the biggest drag on the indices today. The stock gave up part of its recent gains on rumours of a dispute with the government. The stock closed nearly 3 per cent lower. Reliance Industries lost more than a per cent.

After Monday's spectacular run, cement stocks gave up part of their gain today. Gujarat Ambuja was the biggest loser, closing more than 3 per cent lower. Grasim declined over 2 per cent while ACC gave up more than 1.5 per cent.

Technology stocks were weak today as the rupee regained part of its losses from recent days. Infosys closed more than 2 per cent lower while Wipro lost close to a per cent. However, TCS bucked the trend and closed a per cent higher.

Steel stocks had a spectacular day and helped the indices from further losses. SAIL was the star among index stocks, adding more than 5 per cent. Tata Steel added more than 2 per cent.

Hindalco was the biggest gainer among other metal stocks, gaining nearly 4 per cent.

Banking stocks had a good day led by PNB and HDFC Bank which added 3.5 per cent each. OBC gained 2.5 per cent while HDFC added nearly 2 per cent.

Sensex closed at 9242, a loss of 22 points, and the Nifty at 2805, lower by 7 points. Nifty December futures closed at a discount of 4 points to the spot index.

SAIL, Hindalco and PNB were the major gainers among Nifty stocks while Gujarat Ambuja, ONGC and IPCL were the major losers.

The US Federal Reserve raised short term interest rates by another 25 basis points to 4.25 per cent per annum. Some change in the usual phrases used by the Fed to explain its policy led to the expectation that it is at the end of the rate hike cycle. Stocks rallied after the announcement and all the frontline US indices closed higher.

The Dow and S&P 500 closed more than half a per cent higher. Gains on the NASDAQ were lower, adding close to one-fifths of a per cent.

Crude futures remained above the $61 per barrel mark yesterday as winter demand is expected to remain strong. The commodity is trading with marginal losses in early European trades today.

Bharti Tele has announced that it would acquire an 8 per cent stake in SEA-ME-WE, an undersea cable network. The company said it has paid $40 million for the stake. The network links South East Asia to Western Europe through the Middle East. The company said it would be able to offer more competitive bandwidth rates to domestic customers like BPO companies.

ONGC Videsh, the overseas investment subsidiary of ONGC, and CNPC of China has submitted a joint bid for oil assets in Syria. The 2 companies have reportedly made a bid for Petro Canada's 38 per cent stake in a Syrian field. Both companies would be equal partners in the field which has been valued close to $1 billion. A consortium of Indian Oil and Oil India are also in the race for the field.

There are unconfirmed reports that the oil ministry is considering imposition of a penalty on ONGC for not signing performance agreements. A highly publicised dispute has been going on between the company and the ministry over various issues.

ACC has informed the exchanges that it has acquired a 99-per cent stake in Tarmac India. The company being acquired is a subsidiary of a UK-based company engaged in the pre-mixed concrete business. The acquisition would cost ACC Rs12 crore. Meanwhile, the merger of Orissa-based Bargah Cements with ACC has received High Court approval.

Tata Motors is planning to double the capacity for its light truck model, Ace. The model has been a big winner in the southern states where it was launched early this year. The company currently has a capacity to produce 30,000 units annually. National launch is expected only after the capacity expansion.

Dr Reddy's has announced that it has received tentative US FDA approval for an anti-diabetic drug.

Newspaper reports indicate that Tata group is rethinking its investment plans in Bangladesh. Large Tata companies like Tata Steel, Tata Power and Tata Chemicals had announced major projects in the country early this year. According to these reports, pricing of natural gas to fuel the plants is the reason behind the rethink.

Mid-Cap Action