Markets close flat after sensex touches 7800 briefly

03 August 2005

The markets started the day retaining all the strength it exhibited yesterday and the sensex breezed past the 7800 mark without much delay. Strength in technology stocks like Satyam, TCS and Infosys along with other frontline stocks like ITC helped the indices early in the day.

However, the markets were disappointed by the absence of any big announcement at the Reliance AGM. Speculation was rife about the announcement of some big ticket overseas acquisitions by Reliance.

The sell-off in Reliance saw the indices sliding and giving up all their gains. They slipped into the red briefly, only to recover immediately. The markets remained choppy till early afternoon before regaining some strength later in the afternoon.

The last one hour saw another slide in the indices which took them very close to negative territory. The indices closed the day at these levels.

Sensex closed flat at 7756 and the Nifty at 2357, a gain of 3 points. Nifty August futures discount to the spot index widened to 14 points from yesterday's 6 points.

HCL Technology, Satyam Computers and L&T were among the major gainers among Nifty stocks while Reliance Industries, Zee Tele and Tata Motors were the major losers.

Strong economic data and expectations of good corporate performance helped the US indices to close with gains yesterday, despite strong oil prices. Both personal income and personal spending expanded more than expected during the month of June.

The Dow Jones index and S&P 500 gained well over half-a-per cent each while NASDAQ gained over a per cent yesterday.

After opening weak, Crude oil futures for September delivery gained half-a-per cent on the NYMEX to close at a new lifetime closing high of $61.89 to a barrel. The smooth transition of power in Saudi Arabia after the death of the king helped to reduce supply concerns and had led to the weakness earlier in the day.

Crude is very close to the record high of $62.3 per barrel in early European trades today. Expectations of a heavy hurricane season in the Gulf of Mexico and a drop in weekly US crude inventories are pushing up prices.

Indian ADR's generally had a good day yesterday as some of them surged on buying interest. Satyam led the technology pack with gains of well over 5 per cent. Infosys also managed to close with gains of over a per cent. Tata Motors and HDFC Bank were among the significant gainers among other stocks. ICICI Bank and VSNL closed the day with losses.

Reliance Industries has decided to de-merge its holdings in Reliance Energy, Reliance Infocomm and Reliance Capital into separate holding companies. Shareholders of the company would be allotted shares in each of these holding companies on a proportional basis.

Finer details of the de-merger scheme are yet to be worked out and Reliance Industries has appointed a team of financial advisors to finalise the scheme. It is also not clear as to how the control of the three de-merged entities would be transferred to Anil Ambani as per the settlement between the brothers.

Reliance Industries has confirmed that it will increase the capacity of its Jamnagar refinery to 60-million tonnes per annum over the next five years. Once the expansion at an expected cost of Rs25,000 crore is completed, The refinery will be one of the world's largest single location refineries.

Reliance also confirmed that it is looking at overseas acquisition opportunities in the petrochemicals space. There is market speculation that Reliance may pick up a large stake in German petrochemical giant Basel. Purnendu Chatterjee and Haldia Petrochemicals are believed to have exited the consortium which won the bid for Basel. Reliance would step in for The Chatterjee group according to reports.

All these news flows could not hold the stock price of Reliance today as it gave up most of the gains made yesterday. The stock closed well over 3 per cent lower and the market cap also came down below Rs1 lakh crore.

Global ERP software major Oracle would acquire a majority stake in banking software company I-Flex Solutions. Oracle has acquired the 41 per cent stake held by Citigroup Venture Capital for $593 million. An open offer would be made for an additional 20 per cent stake at Rs882.6 per share. Including the open offer, the total acquisition cost is expected to cross $900 million.