Banking and FMCG stocks lead market correction

15 December 2005

After yesterday's weak closing, a correction was expected in the markets today. The rally in broad US indices yesterday and a decline in crude prices could not inspire an up trend in Asia today. Asian markets were mixed today with Japan and Indonesia losing more than a per cent each while Hong Kong added more than half-a-per cent.

The indices opened the day with gains and traded within a range till afternoon. The bias was downwards and by noon, both indices had given up all their gains. They slipped into the red by early afternoon as profit booking started on most frontline stocks.

Markets gave up more ground later in the afternoon as select stocks came under heavy selling pressure. The last hour saw a mild recovery, but the indices could not gain much ground.

Banking stocks came down heavily today and the PSU banking stocks were the major losers. SBI and PNB lost more than 3.5 per cent each. HDFC Bank closed over 2 per cent lower while ICICI Bank gave up over 1.5 per cent.

FMCG stocks also came under selling pressure and Dabur was the biggest loser among index stocks. The stock gave up more than 4 per cent today. ITC was another major loser in this space, closing more than 2.5 per cent lower.

Glaxo was the biggest loser among pharma stocks, closing more than 3.5 per cent lower. Ranbaxy lost close to 3 per cent while Dr Reddy closed almost 2 per cent lower.

The rally in steel stocks lasted only one day as both SAIL and Tata Steel lost ground. SAIL lost 3 per cent while Tata Steel closed nearly 2.5 per cent lower.

Jet Airways and Hero Honda were the other big losers among index stocks.

The weakness in broad markets did not have much of an impact on technology stocks. Satyam was the star, closing more than 5 per cent higher. Infosys added more than a per cent. TCS also managed to close with gains.

Sensex closed at 9170, a loss of 71 points, and the Nifty at 2779, lower by 26 points. Nifty December futures closed at a discount of 2 points to the spot index.

Satyam, MTNL and Hindalco were the major gainers among Nifty stocks while Dabur, VSNL and Glaxo were the major losers.

US markets had a mixed day yesterday as technology stocks weakened even as the broader market remained firm. Data released yesterday showed an easing of inflationary pressures, which helped expectations of an end to rising interest rate cycle. Technology stocks lost ground on earnings downgrades for major stocks.

The Dow added over half-a-per cent while S&P 500 ended close to half-a-per cent higher. NASDAQ closed one-tenth of a per cent lower.

Crude oil gave up nearly a per cent yesterday as US commercial stocks of oil as per the weekly inventory data was higher than expected. January futures on the NYMEX lost more than 50 cents to close at $60.85 per barrel. The commodity has lost another half-a-per cent in early European trades today.

Tata Steel has announced that it would acquire a Thailand-based manufacturer of construction steel. The target company, Millennium Steel, has an annual capacity of 1.7-million tonnes.

Millennium is a listed company and Tata Steel would be acquiring 40 per cent stake from the current promoters. The company would also make an open offer and may also subscribe to fresh equity to raise its stake above 51 per cent. The acquisition is expected to cost Tata Steel a total of $400 million.

Millennium Steel is the largest manufacturer of construction steel in Thailand. The company had recorded profits of close to $30 million on revenues of over $400 million, last year. Tata Steel is expected to improve the operating efficiencies of the Thai company.

The government is expected to clear ONGC's proposed $2 billion investment to acquire a large stake in a Nigerian oil field. The company has reportedly sought permission for a further investment of up to $3 billion in Nigeria, taking the total to $5 billion.

Meanwhile, ONGC has reportedly offered multi-billion dollar infrastructure investments in Kazakhstan in return for stakes in oil exploration blocks. The offer has been reportedly made by the ONGC-Mittal consortium. The company has concluded a similar deal with the government of Nigeria recently.

TCS is reportedly planning to double its employee strength in the US by next year. The move is to get into more high value services which are dominated by global majors like IBM.

Tata Motors is planning to export its SUV models to Russia and Australia, starting next year. The company said the Russian market is more promising. Tata Motors had earlier announced plans to set up an assembly unit in Russia for passenger cars.

L&T expects opportunities in Middle East to be highly promising over the next five years. The company is planning to increase its annual revenues from the region to $1 billion within this period from the current $250 million. The Middle East is witnessing large investments in infrastructure sector helped by high oil prices.

Mid-Cap Action

Mid-caps also lost ground today and the fall in some of the prominent mid-cap stocks was severe. Stocks like Pantaloon, Titan, Voltas and SRF which are traders' favourites were among the biggest losers. The CNX Mid-Cap index lost 33 points and closed the day at 3940.

Everest Kanto Cylinder, a manufacturer of LPG cylinders, made its entry on the exchanges after its recent IPO. Issued at Rs160 per share, the stock opened at Rs201 on the NSE and saw a high of Rs231 before closing at Rs202.

Glenmark Pharma has announced that it has signed an agreement with US- based InvaGen to develop and market generic drugs. The company said the development and marketing costs would be shared equally without giving any specific numbers. As per the statement, the current market for the molecules under consideration is over $4 billion.

Nagarjuna Constructions has completed its GDR issue at $5.11 per GDR. The receipts would be listed on NASDAQ, London and Luxembourg exchanges. The issue would net the company $105 million.