Indices bounce back as technology stocks surge on weaker Rupee

30 August 2005

The indices opened with a strong positive gap from yesterday's closing levels, encouraged by the recovery in US markets yesterday. A relatively modest closing level for crude oil yesterday after posting record highs of over $70 in intra-day trades also helped market sentiment.

The rally was led by technology stocks as the Rupee slipped to a nine-week low raising expectations of better earnings growth for software exporters. The rupee has been weak for many days now as FII inflows have slowed down and the country's current account deficit continues to expand on higher crude oil import bills.

The technology pack was led by Satyam computers with gains of over 4 per cent followed by TCS and Wipro with gains of over 2 per cent each. HCL Technologies was the biggest gainer among technology stocks in the index, closing over 6 per cent higher. Infosys gained close to 2 per cent.

Markets maintained a steady up trend for most of the day and picked up strength in afternoon trades on short covering. The last half-hour saw some profit booking by intra-day traders, but the decline from the day's highs was marginal.

Sensex closed at 7745, a gain of 111 points, and the Nifty at 2368, a gain of 30 points. Nifty September futures closed at a discount of 21 points to the spot index.

Zee Tele, HCL Technologies and Satyam were the biggest gainers on the Nifty while Reliance Energy, M&M and Sun Pharma were the major losers.

US markets closed higher yesterday as oil stocks surged in higher crude prices. Damages reported from the Hurricane Katrina were also lower than earlier expectations as the storm weakened after hitting US coast.

The Dow and S&P 500 closed with gains of well over half-a-per cent each. Gains on the NASDAQ were higher at over three-quarters of a per cent.

Crude futures for October delivery declined in afternoon trades yesterday after crossing the $70 mark for the first time in early trades. The commodity closed the day at $67.2 per barrel on the NYMEX yesterday. Crude is trading with gains of over a per cent at $68 per barrel in early European trades today.

Indian ADR's had a good day in the US markets yesterday. MTNL was the biggest gainer closing over 2 per cent higher while the other telecom stock VSNL closed a per cent higher. HDFC Bank closed more than a per cent higher while ICICI Bank also closed higher.

Among the technology ADR's, Wipro and Infosys closed more than a per cent higher while Satyam gained close to a per cent. Tata Motors and Dr. Reddy's were the biggest losers closing with losses of over 2 per cent each.

There is considerable market speculation that Infosys is close to finalising a large multi-year contract with a European bank. There have been many reports over the last few months about the negotiations for the contract. Infosys had declined to comment on such reports.

The new order, believed to be from Swiss banking major UBS, is now said to be considerably bigger than earlier reports. The order is reportedly worth $500 million as against $100 million earlier.

TCS has completed implementation of core banking solutions in over 4,000 branches of SBI across the country. With this SBI now boasts the largest branch network operating on core banking software globally.

There are media reports that SBI is planning to set up a separate company to offer banking software solutions in partnership with a large IT company. According to these reports, the bank is in discussions with TCS on this project, which would leverage SBI's domain expertise with the technology skills of the IT company. SBI closed more than 2 per cent higher.

Tata Steel has signed an agreement with Nippon Steel for technical assistance during implementation of its proposed integrated steel mill in Orissa. The company has initiated land acquisition for the project, the first phase of which is expected to be completed by 2009. The stock closed almost 2 per cent higher.

Meanwhile, engineering and construction major L&T has reportedly initiated preliminary discussions with Posco of South Korea for the construction of the latter's proposed steel plant in Orissa. The 12-million tonnes per annum plant would be set up in two phases involving a total investment of $12 billion. The stock gained three-quarters of a per cent.

Ranbaxy is taking the legal route to challenge the extension of Pfizer patent on cholesterol lowering drug, Atorvastatin. According to media reports, Ranbaxy has filed suits against the patent extension in US and European courts. Atorvastatin is a blockbuster product for Pfizer and the company had succeeded in extending the patent after the original patent expired. The stock closed higher.

ITC is planning to take its apparel brand Wills to the US and European markets. The company has registered the brand in these markets and is currently believed to be in discussions with major retailers. ITC is planning to achieve 10 per cent of its garments business from overseas markets in the next few years.

ITC is also planning to set up own garment retail stores in East Asian countries like Philippines and Indonesia. The company would expand the garment manufacturing capacity at its Bangalore unit to target sales to major international retailers. The stock closed almost half a per cent higher.

Reliance Industries has stated that there are no proposals before its board for the acquisition of Innovene, a subsidiary of British oil major BP, as reported in the media. The company was replying to queries by the exchanges after such reports yesterday. The stock closed a per cent higher.

According to news agency reports, ONGC Videsh has emerged as the highest bidder for some of the oil and gas blocks in Nigeria. The stock gained close to a per cent.

Zee Tele was the biggest gainer among index stocks on market speculation about the cricket broadcasting rights. There is market talk about the contract going to Zee and a decision to be announced as early as within a week. The stock closed over 6 per cent higher.

FMCG stocks also saw considerable demand today. Both HLL and Colgate closed with gains of two and a half per cent each.

Mid-Cap Action

Mid-caps also resumed their up trend after yesterday's correction. However, gains on the mid-cap index were lower than the frontline indices. The CNX Mid-Cap closed the day at 3630, a gain of 37 points or a per cent.

After establishing its premier position in the domestic market, NDTV is spreading its wings overseas. The company has signed a joint venture agreement with Astro Broadcasting to run television channels in East Asian countries. The JV, in which NDTV would hold a 20 per cent stake initially, would start with Indonesia and Malaysia. The stock closed with marginal gains.

Ballarpur Industries, the country's largest paper manufacturer, has reported a 26 per cent rise in profits for the year ended June 2005. Total revenues were marginally higher during the year. For the fourth quarter ended June, the company has reported an 8 per cent growth in profits on a marginal increase in revenues. The stock closed 2 per cent higher.

Bajaj Hindustan, the largest sugar company in the country, has acquired a majority stake in Pratappur Sugar from its promoters. The acquisition has been made at Rs55 per share for a total consideration of close to Rs11 crore. Bajaj Hindustan would make an open offer for another 20 per cent at a price of Rs56.5 per share. Bajaj Hindustan closed with gains of 5 per cent.

Meanwhile, Bajaj Hindustan has awarded the contract to build its new sugar mill in the state of UP to Era Constructions. The order is worth over Rs16 crore and would be completed in 5 months.