Infosys, ONGC and Reliance Industries pull down the indices

12 January 2006

A weak opening was expected today after the quarterly numbers from Infosys and Reliance Industries turned out to be less than inspiring. The sharp decline in Infosys ADR yesterday in the US markets added to the negative sentiment.

Both indices opened sharply lower, but recovered smartly soon after. By mid-morning, both indices were close to yesterday's closing levels. More selling pressure pulled down the indices again and they declined to the early lows by afternoon.

The last one hour saw a recovery, helped by encouraging results from TCS. The indices regained half of their afternoon losses before close.

Infosys was the biggest loser among the index stocks as the company's quarterly results, announced yesterday, did not match the high expectations of most investors. The stock opened with significant losses before recovering part of the losses and closed nearly 5 per cent lower.

TCS opened weak but rallied later in the afternoon after the company announced its results. The market was impressed by the healthy sequential growth in both revenues and profits. The stock closed with gains of 0.5 per cent.

Other tech stocks, Wipro and Satyam also gained in afternoon trades. Satyam closed more than 2 per cent higher while HCL Tech added over a per cent.

Reliance Industries, which announced its results after market hours on Tuesday, also opened weak. The decline in profits because of a planned refinery shutdown and lower margins took some shine off the stock. It recovered part of the losses later in the day and closed less than a per cent lower.

ONGC gave up nearly 2 per cent, adding pressure on the Nifty.
The continuing rally in crude prices led to weakness in stocks of oil marketing companies. BPCL lost more than 2.5 per cent while HPCL declined nearly 2 per cent.

Ranbaxy, HDFC, Jet Airways and Bharti were the other major losers among index stocks.

Grasim was the biggest gainer among index stocks, closing nearly 3 per cent higher.

SAIL, SBI, Maruti and Nalco were among the other major gainers among large stocks.

Sensex closed at 9381, a loss of 64 points, and the Nifty at 2851, lower by 20 points. Nifty January futures closed at a discount of 24 points to the spot index.

Concerns about the Iranian nuclear programme following the fresh move by western countries to take the matter to the UN Security Council kept crude prices firm yesterday. February futures on the NYMEX closed at $63.94 per barrel. Iran is the second largest oil producer among OPEC members. Expectations of lower US oil stocks are also supporting crude prices. The commodity has gained another per cent in early European trades today.

TCS, the largest IT services company, has reported a 5.6 per cent growth in third quarter consolidated profits to Rs753 crore from Rs713 crore in the previous year quarter. Revenues grew at a much faster pace of 22.68 per cent to Rs3,303 crore from Rs2,692 crore during the previous year quarter.

As compared to the second quarter of the current year TCS has managed to grow revenues by 10.73 per cent and profits by 8.55 per cent. The company had reported consolidated net profits of Rs694 crore on total revenues of Rs2,983 crore for the second quarter of current year. The board of TCS has recommended an interim dividend of 300 per cent or Rs3 per share.

The BPO subsidiary of Infosys, Progeon, may go public by next year, according to media reports. The company is focusing on transaction processing and has achieved revenues of $44 million in the latest quarter ended December. Infosys management had mentioned that the company is looking at strategic acquisitions to build capabilities.

Maruti would invest over Rs2,700 crore to introduce new models of passenger cars over the next 2 years. The new models are expected to include a premium sedan, an upgraded SUV models and diesel versions of its existing models.

The government has completed the sale of an 8 per cent stake in Maruti today. More than 2.3 crore shares were sold to 8 domestic financial institutions at an average price of Rs678 per share. LIC picked up more than 1.6 crore shares while SBI acquired more than 39 lakh shares.

M&M is targeting a 20 per cent increase in sales of its SUV model Scorpio to 34,000 units for the current year ending March. The company is planning to launch a hybrid version of the vehicles within the next 3-4 years.

Tata Motors has announced that its engineering services subsidiary INCAT would acquire German auto engineering and design services firm. The company said the acquisition helps INCAT to expand its reach in Europe. The acquired company is a service provider to some major European auto companies.

The overseas oil exploration JV promoted by Indian Oil and Oil India is reportedly looking at acquiring explorations rights in Indonesia. Nearly 10 exploration blocks in Indonesia would be auctioned by next month.

Reliance Industries has informed the exchanges that the company would now be recognised as the promoter of Reliance Industrial Infrastructure (RIIL), a listed company. Reliance Industries hold a 46 per cent stake in RIIL and no open offer would be made to other shareholders.

Air Sahara, the second largest private airline, denied media reports that the airline is being taken over by larger rival Jet Airways. The Jet Airways stock had seen some appreciation early this week on unconfirmed reports that it is close to acquiring Air Sahara. The airline clarified that it is holding talks only for a strategic operational alliance with Jet.

Gail India has reported a net profit of Rs643 crore for the third quarter as against a net income of Rs635 crore for the previous year quarter. Revenues for the latest quarter were at Rs4,597 crore compared to Rs3,615 crore.

Mid-Cap Action

Mid-caps too declined further as most stocks saw some profit booking. Heavy buying was seen in select sectors like sugar and retail. The CNX Mid-Cap index lost 12 points and closed the day at 4202.

Mastek Limited has reported a consolidated net profit of Rs16.17 crore on net revenues of Rs175.15 crore for the second quarter ended December. The company has achieved a marginal growth of less than 1 per cent in adjusted profits on revenue growth of 14.4 per cent as compared to the first quarter ended September.

Mastek said the reported numbers are not strictly comparable to prior periods as the operational model has changed in the current year. The board has approved a bonus issue in the ratio of one share for every share held.

For the third quarter, Mastek has given a guidance of Rs16.3-Rs17.3 crore in profits on consolidated revenues of Rs177-Rs182 crore.