Sensex drops 100 points amid extreme volatility

High volatility was the order of the day and the Sensex underwent wild gyrations. Heavyweights came to the rescue of the two key indices, the BSE Sensex and the NSE Nifty. An upmove in ONGC restricted the fall in the Nifty, while Reliance Industries (RIL) restricted the damage in the Sensex.

The Sensex lost 99.72 points (0.7%) for the day, to settle at 14,090.98. The S&P Nifty shed 13.75 points (0.34%), to 4,044.55.

RIL gained 1.1% to Rs 1372. The stock was up after an initial slide to a low of Rs 1341.10. RIL has a huge 11.3% weightage in the Sensex. The upstream regulator said last Thursday that crude production from RIL’s deepwater gas block, off the country's east coast, was commercially viable.

ONGC rose 2.5% to Rs 887.90. RIL and ONGC have a combined weightage of 18.51% in the NSE Nifty. As per reports, ONGC, which is looking for better technological expertise to increase output from its oil and gas fields, as well as for acquiring more assets abroad, is set to strike the first asset swap deal with Italy’s ENI on Wednesday.

Another report said ONGC had initiated talks with Brazil’s Petrobras for offering each other a stake in their respective oil & gas blocks. Volatility remained high today. A sell-off took the Sensex below 14,000 points in late trading before a solid rebound materialised, thanks to strength in RIL. The Sensex recovered from a lower level after losing as many as 233 points, to 13,957.70, at 14:58 IST.

In early trade, the Sensex had recovered from the lower level after an initial sharp fall of 177.24 points, to a low of 14,013.46, and kept recovering till the afternoon, only to fall all of a sudden. The Sensex had surged as many as 172 points, to a high of 14,363.74, at 13:25 IST.

The barometer index fluctuated a massive 960 points between some of the vital intra-day tops and bottoms of the day. It also fluctuated 406.04 points between the day’s low of 13,957.70 and high of 14,363.74.

The market-breadth turned weak in the latter part of trading. For 1,490 shares declining on BSE, 1,101 shares rose. Just 76 stocks were unchanged. Losers outpaced gainers by a ratio of 1.35:1. In afternoon trade, the advance-decline ratio was almost 2:1. BSE Small-Cap Index lost 39.11 points (0.5%), to 7,088.15. The BSE Mid-Cap Index shed 36.17 points (0.6%), to 5,785.28.

All the BSE sectoral indices except the BSE Oil & Gas index ended in the red. The biggest losers in percentage terms was the BSE Metal Index. It dropped 130.94 points (1.5%), to 8,485.49. BSE’s banking sector index, the Bankex, shed 96.09 points (1.3%), to settle at 7,266.74. The BSE IT index shed 57.22 points (1%), to 5,366.54. The BSE Oil & Gas index gained 71.36 (1.1%), to 6,548.54.

The BSE clocked a turnover of Rs 4860 crore, compared to Monday’s Rs 4271 crore.

The turnover in NSE’s derivatives segment surged to Rs 49029 crore. The turnover had risen to Rs 39996 crore on 12 February 2007 compared to a turnover between Rs 26682.02 crore and Rs 32219 crore from 1 February 2007 to 9 February 2007. Nifty February futures were at 4068, a premium of 23.45 over the spot Nifty closing of 4044.55.

Fears of a further rise in domestic interest rates, and a large number of IPOs lined up for the next few weeks has weighed on the market sentiment of late. The Sensex had tanked 348 points on Monday (12 February 2007) partly due to weak Asian markets, and partly due to concerns of further rise in interest rates.

Data on Friday (9 February 2007) showed inflation rose to its highest level in more than two years, fanning concerns of a further rise in interest rates. At its quarterly policy review on 31 January 2007, RBI had raised its key short-term rate, the repo rate, by 25 basis points. Recently, private sector ICICI Bank raised its benchmark reference rate on corporate loans and home loans by 100 basis points.

FIIs have pressed heavy sales in the derivative market recently. FIIs were net sellers to the tune of Rs 1204 crore in index-based futures on 12 February 2007. They were net sellers to the tune of Rs 560 crore in index-based futures on 9 February 2007.

Before the current fall, the Sensex had risen sharply on the back of increased buying by FIIs. From 14,090.92 on 31 January 2007, the Sensex rose 561.17 points (3.98%) in six trading sessions, to a lifetime closing high of 14,652.09 on 8 February 2007. Foreign funds have stepped up buying since the upgradation of India by Standard and Poor's to investment grade. A lot of funds, for instance, pension funds in foreign countries, which were not allowed to invest in Indian equities hitherto, will now become eligible to purchase Indian equities after the Standard & Poor's upgrade on 30 January 2007.

The barometer index is up 304.07 points (2.2%) in calendar 2007 so far. It has lost 561.11 points (3.8%) from a lifetime closing high of 14652.09 on 8 February 2007.

In today’s trade, Bharti Airtel was up 2.3% to Rs 745.65, off sharply from the session’s high of Rs 768.25. As per reports, Bharti Airtel signed an infrastructure sharing agreement with Vodafone, which will allow both operators to share nearly 70,000 mobile towers across the country. Vodafone emerged as a top bidder for the fourth largest cellular firm, Hutch-Essar, on Sunday.

Reliance Communications dropped 2.3% to Rs 444.35. The stock dropped for the second day in a row after missing out on the acquisition of Hutch-Essar.

Hindalco lost 4% to Rs 143 , extending Monday’s sharp fall in the counter. Worries that Hindalco will not reap the benefits of the $5.9 billion deal to buy Novelis Inc for some time, had knocked down its shares on Monday.

Engineering & construction major L&T lost 3% to Rs 1609.

Tata Steel lost 2.5% to Rs 432.55. The stock has been hit by its acquisition of Corus late-January 2007, which is seen as expensive.

IT bellwether Infosys shed 1.7% to Rs 2310 in volatile trade. The stock moved between Rs 2285 and Rs 2358. Wipro gained 2% to Rs 641.50.

Ranbaxy rose 1.8% to Rs 617.70, after the drug maker, which is fighting to overturn Pfizer Inc's exclusivity on cholesterol fighter Lipitor, launched a generic form of the drug in Denmark.

Select side-counters were in demand. Top gainers among side counters were Syngenta India (up 12% to Rs 422), Pritish Nandy Communications (up 12.2% to Rs 58.65), Tulip IT Services (up 10% to Rs 569.45), Steel Strips Wheels (up 10% to Rs 231), Shalimar Paints (up 10% to Rs 177.35), Shakti Pumps (up 8.7% to Rs 136.80), Yuken India (up 7% to Rs 179), NIIT (up 6.6% to Rs 580), Rajesh Exports (up 6% to Rs 444), Lloyd Electric (up 6% to Rs 180.50, Finolex Cables (up 5.9% to Rs 101), Zee Entertainment (up 5% to Rs 272.50) and Balaji Telefilms (up 5% to Rs 126.25).

South East Asian Marine Engineering & Construction rose 1.6% to Rs 186.50. The company unveils December 2006 quarter results today.

Syngenta India jumped nearly 10% to Rs 414, after the agri-busines firm said it will seek shareholders' approval on 15 March 2007 to delist the company's shares from the BSE.

While IDBI rose 3.4% to Rs 89.70, IFCI gained 3.4% to Rs 27 after NSE removed curbs on building fresh positions in the derivative contracts of both companies.

Federal Bank jumped nearly 5% to Rs 249.45, after its board on Monday approved a 1:1 rights issue.

Ansal Properties plunged 5% to Rs 707.80. The stock plunged for the second day in a row even as the company, during trading hours on Monday, recommended a 1:1 bonus issue.

Auto parts maker, Autoline Industries, gained nearly 4% to Rs 398 after the company said on Tuesday its board will meet on 21 February 2007, to consider a take over of 49% stake in subsidiary, Autoline Dimensions Software. The board will also consider a proposal to take over a domestic or a foreign company, Autoline Industries added.

Suzlon Energy gained 1.6% to Rs 1098, recovering from Monday’s sharp fall. The stock had nosedived on Monday on concerns about a short-term strain on its financials due to plans for a big acquisition overseas. Suzlon Energy is bidding in consortium with Martifer, Portugal, a steel construction company operating across Europe, for acquiring control of Germany’s REpower.

Alstom Projects gained nearly 5% to Rs 471, after it won a large order worth Rs 750 crore.

Orchid Chemicals dropped 9% to Rs 243.95, due to concerns of equity dilution after the company raised $175 million in a five-year, zero-coupon convertible bond. The bonds have a yield-to-maturity of 7.25%, calculated semi-annually, and having an initial conversion price of 30%, above Rs 267.95.

Indiabulls Financial Services rose 2.6% to Rs 409.85, after the company said its board will meet on 15 February 2007 to consider a composite scheme of arrangement under Sections 391-394 of the Companies Act 1956, for the amalgamation of Indiabulls Credit Services with the company. The proposal for demerger of the securities trading and advisory business of Indiabulls Financial Services to Indiabulls Securities will also be taken up at the same meeting.

Construction firm IVRCL Infrastructures & Projects dropped nearly 4% to Rs 366.70 in volatile trade after the company said on Tuesday it had secured contracts for irrigation, rural electrification and construction of an aggregate worth Rs 516 crore.

Omax Autos gained 2.2% to Rs 93.05, after the company said it would spend Rs 155 crore to set up a truck and bus-chassis making unit to reduce dependence on two-wheeler components, forecasting revenue of Rs 700 crore for 2006/07 and about Rs 800 crore for 2007/08.

Nymex crude was hovering flat at $57.79 a barrel after Monday’s sharp fall. US crude oil prices fell more than $2 to below $58 a barrel on Monday after OPEC members, Saudi Arabia and Qatar, and the cartel's head of research said OPEC may steer away from further supply cuts.

European markets opened positive. Key benchmark indices in London, Germany and France were up between 0.2 - 0.4%. Asian markets were mixed. Key benchmark indices in Hong Kong, Singapore and Taiwan were down between 0.5 – 2.2%, whereas key benchmark indices in Japan and South Korea were up between 0.29 - 0.67%.

US stocks slipped on Monday after a 3.5% drop in oil prices hit shares of energy companies, while worries about rising mortgage defaults spilled over to the banking and housing sectors for the third day. The Dow Jones industrial average slipped 28.28 points, or 0.22%, to end at 12,552.55. The Standard & Poor's 500 Index declined 4.69 points, or 0.33%, to finish at 1,433.37. The Nasdaq Composite Index dropped 9.44 points, or 0.38%, to close at 2,450.38.