Sensex snaps four-day winning streak

Profit-taking emerged in select frontline shares including index heavyweight Reliance Industries (RIL), which brought the Sensex down in a volatile trading session. Volatility in the Sensex was partly due to volatility in some of its constituents, namely, Reliance Industries, ICICI Bank and Bharti Airtel.

The 30-share BSE Sensex lost 30 points (0.23%), to end at 13,156.66. The S&P CNX Nifty dropped 10.50 points (0.28%), to end at 3,798.75.

The market remained volatile throughout the day. The benchmark index, which had weakened in late trading, had earlier surged over 100 points in opening trade tracking firm global markets, to hit 13,300 level for the first time.

Between some of the vital tops and bottoms of the day, the Sensex swung over 300 points. Between the day’s low of 13,135.21 and a high of 13,300.69, it swung 165.48 points.

The market-breadth turned weak during the course of trading compared to that in early trade. For 1,390 shares declining on BSE, 1,124 rose. Just 80 stocks were unchanged. Losers outpaced gainers by a ratio of 1.23:1.

The turnover on BSE surged to Rs 4,714 crore from Monday’s Rs 4,265 crore.

Select side-counters surged. Punjab Communications (Rs 52.70), Shyam Telecom (Rs 158.75), Development Credit Bank (Rs 49.80), Pantaloon Retail (Rs 2156), Action Construction (Rs 244.65), Revathi Equipment (Rs 643), Indo Asian Fusegear (Rs 130.45), Centum Electronics (Rs 227.50), Suryajyoti Spinning (Rs 49.90), Nucleus Software (Rs 536), Apollo Hospitals (Rs 489), Binani Industries (Rs 320), Motherson Sumi Systems (Rs 99), Voltamp Transformers (Rs 512.55), Sesa Goa (Rs 1294), and Aban Offshore (Rs 1200) rose between 6 - 20%.

Firm global markets, due to ample global liquidity, have propelled the Sensex to an all-time high above 13,000. The BSE Sensex surged 224.99 points (1.7%) in the past four trading sessions, from 12,961.90 on 31 October 2006. It rose in all those four trading sessions.

The Indian equity market has benefitted from strong global liquidity. The domestic bulls have been going strong for about two years now. During this period, the market staged a strong comeback after some major corrections. In calendar 2006 so far, the BSE Sensex is up almost 40%.

However, valuations appear stretched. At 21.6 times its trailing 12-month September 2006 earnings, the Sensex is trading at a premium over its regional peers.

Last few trading sessions have witnessed a rally in select small-cap and mid-cap shares. Even as the Sensex has surged to an all-time high, a number of small-cap and mid-cap stocks are yet to see their all time highs since May 2006.

In today’s trade, RIL shed 1.4% to Rs 1,286.60, in contrast to the firm early trend when it had hovered at about Rs 1,312. The stock surged since late last month on multiple triggers, and played a key role in the benchmark index's surge by virtue of being a heavyweight. RIL has a huge 11.8% weightage in the Sensex.

Software major Infosys rose 1.6% to Rs 2,105. Infosys' shareholders today approved an issue of up to 30 million American Depositary Receipts before markets opened. At the time of announcing Q2 results, Infosys said that it was planning a sponsored ADR issue.

Housing finance major HDFC added 2.5% to Rs 1,566, extending its recent upmove, which has been triggered by expectations of growth in demand for housing loans in Maharashtra after the state government last week announced incentives for the housing industry.

Dr Reddy’s Lab rose 2% to Rs 793. Last month, the company reported robust Q2 results.

Metal shares rose tracking firm base metal prices on LME. Hindustan Zinc jumped 5% to Rs 987.60. On the London Metal Exchange, zinc hit a record high of $4,460 a tonne, up from Monday's close of $4,405 a tonne. Zinc futures have gained nearly 134% so far this year, outperforming other base metals.

Shares of oil marketing firms edged lower as crude price surged. Indian Oil Corporation lost 2.2% to Rs 505, BPCL shed 3.3% to Rs 389.65 and HPCL lost 3.4% to Rs 310. Oil marketing firms continue to make losses on sale of diesel, kerosene and LPG, while making profit on petrol.

Two-wheeler makers slipped. Bajaj Auto lost 2.6% to Rs 2,720 and Hero Honda shed 3% to Rs 737. The two-wheeler industry has been witnessing pressure on margins due to rising input costs and intense competition.

Car major Maruti Udyog lost 1.2% to Rs 943.50, on reports that the ministry of commerce and industry had rejected the automaker’s application for granting special economic zone (SEZ) status for its manufacturing facility being developed at Manesar, in collaboration with Nissan.

Tata Steel shed 1.8% to Rs 496.50. Tata Steel is optimistic it will complete the agreed takeover of Corus Group by January, Tata Steel Managing Director B Muthuraman said on Monday. Some investors, including Standard Life Investments, the biggest shareholder in Corus, have said the agreed price of 455 pence per share was lower than expected.

FMCG giant Hindustan Lever ended flat at Rs 247.10. Volumes in the scrip were a hefty 28.2 lakh shares on BSE.

Iron ore exporter Sesa Goa jumped 6% to Rs 1,294, tracking a rally in mining stocks across global markets.

Hotel shares were in demand on strong prospects due to rising room rates and healthy occupancies. Indian Hotels rose 3% to Rs 148.75, Hotel Leelaventure rose 0.4% to Rs 64.65, EIH gained 5% to Rs 106 and Royal Orchid Hotels rose 2% to Rs 190.95. In terms of financial performance, the second half of the year – October-March period -- has been traditionally strong for the hotel industry.

GMR Infrastructure rose nearly 2% to Rs 353, after the Supreme Court on Tuesday rejected a petition filed by Anil Ambani's Reliance Airport Developers challengiing the government's decision to award bids for modernising Delhi and Mumbai airports to rival bidders. "We find no merit in the plea," a bench comprising of two judges said. GMR has won the bid to modernize the Delhi airport.

Punj Lloyd rose 3.4% to Rs 874, after the company said on Tuesday it had been offered contracts worth Rs 1,163 crore from state-run Indian Oil Corporation for their refinery project at Haldia, West Bengal.

Recently-listed Development Credit Bank jumped 10.7% to Rs 49.80. The stock rose on a heavy volume of 1.22 crore shares on BSE.

Meanwhile, National Council for Applied Economic Research (NCAER) has revised up its 2006/07 economic growth forecast to 8.1% from 7.9% previously due to good monsoon rains, robust exports and foreign investment inflows. It expects GDP to expand by an average annual rate of 8.2% in the next five years. Finance Minister P Chidambaram said on Tuesday the economy can sustain 8 - 10% growth in coming years with more reforms.