Indices crumble under all-round selling

23 August 2005

After opening with gains, the indices gave a glimpse of what was in store for the rest of the day by dipping sharply for a brief while before recovering. But not many would have been ready for the extent of the fall even after three days of moderate correction.

The first hour was relatively uneventful as the indices tried to hold ground around yesterday's closing levels. Then the sell-off started and the indices crumbled under their own weight, built up over the last few weeks.

Though the initial trigger was the negative FII figure for last Friday, the decline gained momentum as traders rushed to cover their long positions ahead of Thursday's derivatives expiry. Weakness in heavyweights like ONGC, Reliance Industries, Tata Steel, ICICI Bank, SBI and SAIL led to one of the worst days in the last few months.

Sensex closed at 7616, a loss of 134 points, and the Nifty at 2326, a loss of 42 points. Nifty August futures closed the day at a premium of two points to the spot index.

ITC and Tata Motors were the only stocks on the Nifty, which managed to close with marginal gains while VSNL, Ranbaxy and Bajaj Auto were the major losers.

US markets closed with marginal gains yesterday as higher crude prices pared early gains. The Dow and S&P 500 closed with gains of around one-tenth of a per cent each while NASDAQ closed quarter-of-a-per cent higher.

September contracts for crude expired on the NYMEX yesterday at $65.45, higher by 10 cents on worries of supply disruptions in more oil producing countries. October futures were trading higher in early European trades today.

Indian ADR's generally had a weak day yesterday in a flat market. Telecom stocks VSNL and MTNL were among the major losers. VSNL lost 3 per cent while MTNL closed 2 per cent lower. Tata Motors lost 2 per cent. Banking ADR's, ICICI Bank and HDFC Bank, closed with marginal gains

Among the technology ADR's, Satyam gained over a per cent while Infosys and Wipro closed lower. Dr. Reddy's closed with marginal gains.

ONGC-Mittal combine may consider a higher revised bid for Petro Kazakhstan, if allowed to do so. The combine was beaten by CNPC of China, which has bid $4.18 billion for the oil producer.

According to media reports, ONGC-Mittal was in the process of submitting a higher revised bid when the announcement came in favour of CNPC. ONGC lost over 2 per cent in today's trade.

Pharma major Ranbaxy is reportedly in negotiations to acquire a pharmaceutical research company based in Germany. The stock closed over 5 per cent lower.

Bharti TeleVentures is planning to invest $1 billion in the current financial year to expand network capacity. After the expansion the company would cover 5,000 towns across the country as against 2,800 at present.

Bharti has also signed a three-year contract with telecom equipment major Nokia for expanding its network. Under the agreement, Nokia would expand its network in the states of Maharashtra, Gujarat, Bihar and Orissa. The deal is worth $125 million.

Unlike other telecom companies, Bharti has outsourced most of the network installation and maintenance to companies like Nokia and Ericsson. This has helped the company to expand its network at a fast pace and focus more on sales and marketing. The stock lost close to a per cent.

Engineering major L&T is planning to increase its overseas revenues to $1.5 billion from the current $500 million by the year 2010. he company is focussing on the Middle East to expand its overseas businesses.

L&T would open three new subsidiaries in Qatar, Kuwait and the UAE within this year to add to the existing subsidiaries in Oman and Abu Dhabi. The stock lost over 3 per cent today.

Oriental Bank of Commerce, Bank of Baroda and Bank of Maharashtra have teamed up to start banking operations in Malaysia with an initial investment of Rs350 crore. OBC will hold a 30 per cent stake in the JV. OBC is planning to open 20 more branches this year within the country to take its total business to over Rs1 lakh crore.

HCL Technologies has reported a drop in consolidated profits for the year ended June 05. Profits were lower by close to 10 per cent even as revenues rose nearly 15 per cent. The company follows a July - June financial year. The stock closed with losses of over 2 per cent.

HCL Technologies is quite bullish on future growth and expects revenues and profits to rise between 30 and 40 per cent annually till 2008. The company also expects to have at least ten $100 million per year clients by then. HCL currently has only one client with billings of over $100 million.

HDFC Bank has ruled out any acquisition of smaller banks in the near future. The bank said it would prefer to grow organically and is planning to open branches in Singapore and Hong Kong apart from strategic tie-ups with banks in UK and the US.

Indian Oil said its total under recoveries, before sharing with other companies, could be as high as Rs20,000 crore for the current year if the company is not allowed to raise retail prices. The company had reported a loss during the first quarter and crude prices have further firmed up in the current quarter. The government is expected to announce a hike in retail fuel prices soon.

Reliance Energy has approached GAIL for transportation of natural gas from coastal Andhra Pradesh to UP where Reliance is planning a mega thermal station. Reliance Energy will be sourcing natural gas from the KG basin fields of Reliance Industries. The stock closed over 2 per cent lower.

Mid-Cap Action

The day was more painful for the mid-caps as their fall was worse than the frontline stocks. By late afternoon, the mid-cap index was trading with losses of over 2 per cent. The CNX Mid-Cap index recovered marginally and closed the day at 3552, a loss of 72 points or close to 2 per cent.

Mid-cap pharma company Ind-Swift Limited surged over 8 per cent in intra-day trades on reports that the company has received the approval from Drug Controller General for its newly developed anti-diarrhoeal and anti-bacterial drug. The stock closed with gains of close to 6 per cent.

Stocks of retailing companies Pantaloon Retail and Trent saw an intra-day surge early in the afternoon. Pantaloon rallied over 8 per cent and Trent was trading higher by over 4 per cent. The stocks could not maintain the levels and closed the day with gains of around a per cent each.

The board of Federal Bank has approved a GDR issue to raise additional resources. The bank would issue up to two-crore equity shares subject to shareholder approval.

The board of software company Financial Technologies has also approved an issue of ADR's or GDR's for raising up to $100 million.