Indices decline on profit booking

18 August 2005

The markets started the day with the momentum of yesterday's strong closing very much intact. Indices opened with a large positive gap and touched record levels early in the morning.

After trying to hold on to the levels for half-an-hour, indices declined fast as selling emerged in the frontline stocks. After going deep into the red, the indices made a slow and steady attempt at recovery. The up move took the markets back in the green by noon.

The next decline came soon after as buying support failed to emerge in early afternoon trades. The indices steadily lost ground for the rest of the day and closed near the day's lows.

ONGC, which gained close to 5 per cent yesterday, lost over one-and-a-half per cent. Among the technology stocks, Satyam and Infosys were the major losers.

The sensex closed at 7811, a loss of 49 points, and the Nifty at 2388, a loss of 15 points. Nifty August futures closed the day at a discount of 4 points to the spot index.

VSNL, Tata Tea and ACC were among the major gainers among Nifty stocks while Glaxo, HLL and HCL Technologies were the major losers.

The US markets recovered from the previous day's fall, helped by strong results from HP and the sharp decline in crude prices. Gains on the frontline indices were held in check by weakness in oil stocks.

The Dow and NASDAQ closed the day with gains of one third of a per cent while S&P 500 closed with marginal gains.

Crude oil futures for September delivery tumbled close to 5 per cent yesterday. Traders rushed to sell after release of data showing a decline in US crude consumption. The commodity closed at $63.25 on the NYMEX yesterday, down $2.83 from the previous close. Crude was trading with marginal gains in early European trades today.

Indian ADR's recovered from the previous day's fall in line with the broad market trend yesterday. VSNL recovered most of the losses of Tuesday and closed over 3 per cent higher. Tata Motors and Dr. Reddy's closed with gains of over a per cent each.

Among the banking ADR's, ICICI Bank closed lower while HDFC Bank gained half-a-per cent. MTNL also gained half-a-per cent. Among the technology ADR's, Infosys gained a per cent and Satyam gained over half-a- per cent. Wipro closed marginally higher.

Media reports quoting sources at ONGC indicates that the company may come out with an open offer for its own shares after the buy-back of shares currently held by Indian Oil. Indian Oil now holds close to 10 per cent of ONGC and the oil ministry had proposed the settling of the cross-holdings among PSU oil companies through buy-backs.

If allowed to go through, the untangling of cross-holdings would be a boon for Indian Oil, which is reeling under losses. The cash flow would help the company to finance its capital expenditure programmes, in the absence of cash from regular operations. Indian Oil closed close to a per cent higher.

The excise department has demanded Rs494 crore from Reliance Industries with interest and penalty as differential duty on petroleum products sold to PSU oil marketing companies for the period 2000 to early 2005. The department contends that excise duty was collected on sales by Reliance at the final consumer price and not on the import parity transfer price.

Consumer prices are lower than the transfer price because of subsidies imposed by the government. Reliance had reportedly told the oil marketing companies that any additional excise claims should be borne by the latter. The stock lost close to a per cent.

Domestic steel companies are expected to raise spot prices by up to 7 per cent in September. International steel prices have recovered this month as the excess inventories have eased on continuing growth in demand.

The price hike would benefit smaller steel companies, which sell a large portion of their output in the spot market unlike majors like Tata Steel, which sells 80 per cent of output through long-term contracts. Most steel stocks closed lower. Tata Steel and SAIL closed with losses of well over a per cent.

Engineering major Larsen & Toubro is planning to acquire engineering companies in the US and Europe as part of its efforts to build its competency in the deep-water oil and gas exploration business. The company expects deep-water exploration to grow rapidly in the country and has set aside $100 million for the acquisitions.

L&T is also planning to set up an electrical engineering unit in the Middle East to cater to the requirements of the oil and gas industry. The new unit would be a joint venture and the company is looking for a domestic partner. This will be the second overseas manufacturing unit of L&T after its recent foray into China. The stock closed marginally lower.

Tata Motors has announced that its US subsidiary Tata Technologies, Inc would buy the UK-based INTAC. The UK company is a leading provider of engineering and design services in Europe and the US. The acquisition would cost over Rs420 crore.

Tata Motors said the acquisition would strengthen the presence of Tata Technologies in the North American and European markets. It would also help the company to offer a wider range of services. The stock closed with marginal losses.

The plans of Reliance Energy to set up a mega-power plant in UP has reportedly run into tax troubles. The company was planning to set up the plant within a special economic zone (SEZ), which would enable it to claim multiple tax benefits. The government is not very keen on the proposal, as most of the electricity produced by the plant would be sold outside the SEZ. The stock closed over half-a-per cent.

IDFC, the infrastructure finance company listed on the exchanges recently, announced its quarterly results. Profits for the quarter more than doubled to over Rs108 crore as compared to the same quarter of previous year. Total income was higher by over 80 per cent.

Mid-Cap Action

Mid-caps soared in morning trades and the mid-cap index was trading with gains of close to a per cent within minutes of opening. Mid-caps traced the weakness in frontline stocks and declined rapidly. After a brief attempt at recovery around noon, the CNX Mid-Cap index closed the day at 3641, a loss of 18 points.

Pharma companies Lupin and Torrent Pharma are among the six bidders for a 47-per cent stake in Jelfa Pharmaceutical, a state-owned Polish drug company. The Polish government is selling its stake as a part of its privatisation programme. The company had total revenues of over Rs300 crore last year.

Lupin lost well over a per cent while Torrent Pharma declined over 4 per cent.

Orchid Chemicals is planning to launch two more antibiotic drugs in the US markets and has made the applications for approval from US FDA. The planned launches would take the number of drugs marketed by Orchid in the US to five and the company is expecting revenues of $30 million per annum from the US market.

Orchid is also planning to raise up to $100 million through a GDR issue, details of which are being worked out. The proceeds from the issue would be used to retire high cost debt and also to expand the company's generic drugs business. The stock closed well over a per cent higher.