Auto, banks at forefront of the collapse

The market was weak throughout the day, due to selling especially in banking and auto shares. All sectoral indices on BSE settled with losses. But shares from sugar sector bucked the trend in an overall weak market.

The BSE Sensex, which turned weak in the early-afternoon, kept declining as investors exited long positions ahead of the March 2007 deriviative contracts expiry, due on Thursday (29 March 2007).

The 30-share BSE Sensex closed down 161.61 points (1.22%), at 13,124.32. It had opened higher, at 13,322.22, and surged to 13,330.41. But the benchmark index was unable to sustain the higher levels, and succumbed to pressure. Its low for the day was at 13,090.80.

The S&P CNX Nifty lost 41.10 points (1.06%), at 3,819.95.

Volatility is expected to remain high ahead of the expiry of March 2007 derivative contracts. With the market scheduled to remain closed tomorrow (27 March), only three trading sessions are left for expiry of the March 2007 contracts.

The BSE's turnover in the cash segment was Rs 3198.68 crore, while the total market-wide turnover was Rs 44396.43 crore compared to Rs 45,804.21 crore on Friday.

The market-breadth ended weak on BSE, with over two losers for every gainer, after a strong showing in opening trade. Against 1,746 shares that declined, 849 had advanced by the end. As many as 59 scrips also remained unchanged. The BSE Small-Cap Index closed at 6,425.74, down 31 points (0.48%), while the BSE Mid-Cap Index settled at 5,376.72, which is 24.6 points (0.46%) lower than the previous day's closing.

Among the 30-Sensex pack, 25 declined while only 5 of them managed to gain.

Auto shares slipped under pressure. The BSE Auto Index slid 1.78% to 4,950.03, hit by reports that fresh car loans were suffering due to prevailing high interest rates. The sentiment for auto shares was also affected by a surge in global crude oil price, which rose to the highest in three months on news of Iran's detention of 15 British sailors and the United Nation's decision to tighten sanctions against the country, heightening concern that Middle East supplies may be disrupted.

Crude oil for May delivery climbed 51 cents, or 0.8%, to $62.79 a barrel, in after-hours electronic trading on the New York Mercantile Exchange, the highest since 26 December 2007.

Tata Motors was the top-loser, down 4.31% to Rs 755.45, as 2.66 lakh shares changed hands in the counter, after slipping to a low of Rs 749.35. Maruti Udyog (MUL) lost 2.83% to Rs 816, while Hero Honda lost 1.71% to Rs 668.

Bajaj Auto was down 0.34% to Rs 2525. Chairman Rahul Bajaj reportedly said the company may build cars to ward off the prospective threat Tatas' Rs 1 lakh car poses to the two-wheeler market. Tata Motors’ Rs 1 lakh 'people's car' will hit the roads in 2008, denting top-end motorcycle sales, provided the firm gets the product right.

Bajaj's statement was the first confirmation that the country's top three-wheeler and second-largest motorcycle maker was interested in developing a low-cost car. Bajaj Auto had earlier announced it was developing a four-wheeler goods carrier, which is scheduled for launch in 2009.

HDFC Bank (down 2.95% to Rs 982), HDFC (down 2.03% to Rs 1562) and Reliance Energy (down 2.30% to Rs 475) were the other losers.

Banking stocks ended weak, with the BSE Bankex declining 1.98%. It was the top-loser among BSE sectoral indices. Union Bank (down 3.44%), Centurion BoP (down 4.10%), Andhra Bank (down 2.62%), UTI Bank (down 2.58%), and IOB (down 1.97%) had moved downwards.

ICICI Bank slipped 1.80% to Rs 878.50, after it announced its Singapore branch, successfully priced the Euro 500 million Reg S Floating Rate Note under its Medium Term Note Programme (MTN). The Bank is the first Indian one to offer a benchmark sized two-year floating rate note in the Euro market. The offering had an Euro 862 million order-book with a total of 71 investors. New investors accounted for more than 50% of the deal size. The two-year floating rate notes of Euro 500 million were priced at a spread of 40 basis points over the three-month LIBOR.

IT major Satyam Computers was the top-gainer, up 1.65% to Rs 471.80, on a volume of 5.15 lakh shares.

However, other IT stocks succumbed to profit-booking. The BSE IT Index declined 1.2%. Tata Consultancy Services (TCS) was down 2.06% to Rs 1263, on reports that it may get a stake of up to 10% in Deutsche Telekom unit T-Systems for executing $1 billion worth of orders.

Infosys Technologies lost 1.63% to Rs 2062.50, while Wipro declined 2.68% to Rs 584.80 on concerns arising from the rupee’s recent surge against the US dollar. The IT industry derives up to 60 - 70% of its export revenue from the US market. Hence, any strengthening of the rupee impacts the revenue and profits of IT firms. The US and the Europe, together, account for about 80% of India's high-tech export basket.

The rupee rose to a 20-month high against the dollar on Monday, as banks sold dollar holdings to tide over tight cash conditions in the banking system. At 9:55 IST the rupee was at 43.35 per dollar, its highest since 22 July 2005. It had ended at 43.56/57 on Friday (23 March 2007). A week back, the rupee was at 44.11/12 per dollar (rupee closing on 16 March). The IT industry is eyeing an export turnover of $31 billion in the fiscal ending March 2007.

State-run oil exploration major ONGC was up 0.95% to Rs 851.15, as crude oil prices moved north globally.

Private sector steelmaker Tata Steel (up 1.10% to Rs 443.50) and FMCG major Hindustan Lever (up 1.10% to Rs 200.50) advanced.

Reliance Communication (RCom) gained 1% to Rs 429.80, after it decided to start an overseas public offer for its international communication subsidiary, FLAG Telecom, for which the ADAG-group firm has shortlisted Goldman Sachs, Deutsche Bank, Morgan Stanley and UBS as merchant bankers for the process, which will see RCom divesting 10 - 15% equity. FLAG Telecom will be listed on the London Stock Exchange.

FLAG Telecom is a 100% subsidiary of Reliance Communication. The proceeds raised from the IPO will be used to part finance expansion plans announced last year, which include laying 50,000 km fresh undersea cable in regions where there is dearth of international bandwidth. The expansion plan could entail an investment of about 1.5 billion dollar (nearly Rs 7000 crore).

Index heavyweight Reliance Industries (RIL) was down 0.74% to Rs 1369, on a volume of 3.70 lakh shares. It had moved in a narrow range between Rs 1383.35 and Rs 1361. Reliance Industries (RIL) informed BSE that a separate meeting of equity shareholders, secured creditors (including debenture-holders) & unsecured creditors, will be held on 21 April 2007, for approving the scheme of amalgamation of Indian Petrochemicals Corporation (IPCL) with itself.

Private sector Yes Bank was down 1.94% to Rs 146.60, and off its high of Rs 157.90 on BSE. A block deal for 48.80 lakh shares was struck in the Yes Bank counter at Rs 151.25 per share, on NSE.

Sparsh BPO Services settled at Rs 104.75 on volumes of 48.97 lakh shares on BSE. The stock hit a low of Rs 104.75 and a high of Rs 157.05. Sparsh BPO Services’ listing on BSE followed a restructuring scheme of Spanco Telesystems and Solutions. A day ahead of its listing, BSE had set Rs 130.90 as base price for Sparsh, with 20% daily circuit filters.

As per the scheme of arrangement between Spanco Telesystems and Solutions (Spanco) and Sparsh BPO Services (Sparsh), formerly known as Intelenet BPO Services, the domestic call center division of Spanco was demerged and vested into Sparsh on a going concern basis. As a part of the scheme, Sparsh allotted 79,12,275 equity shares of Rs 10 each to shareholders of Spanco in the ratio of an equity share of Rs 10 each for every three equity shares of Rs 10 each held by the shareholders in Spanco on the record date. The equity capital of Sparsh is Rs 16.14 crore and the face value per share Rs 10.

Crisil advanced 5% to Rs 2614.80, on reports that around 20 companies were currently in talks with it for IPO gradings. Credit rating agencies are gearing up for increased activity following market regulator Sebi's decision to make grading of initial public offerings (IPOs) mandatory. Reports add that Crisil will charge 10 basis points of the amount proposed to be raised, with a ceiling of about Rs 10 - 15 lakh. Thus, even a mega-IPO will have a cap on fees.

Glenmark Pharma rose 4.41% to Rs 618.50, after deciding to buy 90% stake in Czech firm Medicamenta, for an undisclosed amount.

Construction firm Atlanta tanked 5% to Rs 315.15, extending a bearish phase ever since Sebi in late-February 2007, clamped down on alleged price manipulation in the counter. There were outstanding sale orders for 2.17 lakh shares at the 5% lower limit of the counter on BSE. Just 832 shares of Atlanta changed hands on BSE. From Rs 1080.75 on 22 February 2007 – the day when the market watchdog levelled allegations of price manipulation in the scrip, the stock of Atlanta has tumbled 70.9% in a little over a month, to the ruling Rs 314.15. In each of these trading sessions, the Atlanta stock had opened and ended at the lower circuit of 5%.

On 22 February 2007, Sebi asked the promoter group, which comprises 16 entities, of Atlanta, and entities/persons associated with them (14 entities) not to deal in Atlanta's scrip. Rajoo Barot, Managing Director, and Sachin Jain, Company Secretary, also featured on the list. The share price of Atlanta rose abnormally after listing at Rs 170 on 25 September 2006. The scrip had surged in a short while, to reach Rs 1264.20 by 11 December 2006.

Shares from the sugar sector had spurted in an otherwise weak market, on reports that the Centre had approved creating a 20-lakh tonne sugar buffer, besides providing export incentives of Rs 1,350 - Rs 1,450 per tonne to sugar mills. The bailout package — aimed at tiding over the present sugar glut and piling up of payment arrears to cane farmers, especially in Uttar Pradesh (UP) — was reportedly cleared by the Cabinet Committee on Economic Affairs (CCEA) at a late evening meeting on Saturday. No official confirmation for the reported development was available though, and the food ministry is expected to issue a statement only later today.

The 20-lakh tonne buffer would be maintained by the factories themselves, even though it is the Centre that will foot the cost of interest, storage and insurance payable on this sequestered sugar. The total buffer quantity will be allocated among mills on a pro-rata basis, linked to the stocks individually held by them. The annual outgo from the exchequer on the 20-lakh-tonne buffer is expected at around Rs 400 crore, depending on how the stock pledged with banks is valued (at three months average or prevailing ex-factory price, whichever is lower) and interest payable on it.

The food ministry is believed to have further recommended an additional Rs 440 per tonne support for raw sugar exports. The confirmation in this regard is also awaited. Given that the market for white sugar is not as promising as raw sugar — particularly with huge refining capacities coming up in neighbouring countries such as Bangladesh (15 lakh tonne), Indonesia (12 lakh tonne), Dubai (15 lakh tonne), Saudi Arabia (10 lakh tonne) and Egypt (7.50 lakh tonne) — a case has been made for giving extra incentives to raw sugar exports.

Shares of Bajaj Hindusthan (up 4.12% to Rs 175.50), Sakthi Sugars (up 7.47% to Rs 68.35), Balrampur Chini Mills (up 3.86% to Rs 64.50), and Shree Renuka Sugars (up 11.41% to Rs 440) had surged.

Godrej Consumer rose 3.55% to Rs 148.95, after announcing the formation of an equal joint venture with a Swedish firm to make sanitary napkins and diapers. The Indian consumer products giant has roped in Sweden's SCA Hygiene Products for the joint venture. The new firm, Godrej SCA Hygiene, will have an equity investment of Rs 20 crore ($4.6 million), which will be equally shared by both firms.

Television content provider Balaji Telefilms surged 5.45% to Rs 123.45 on hopes that general entertainment channels will regain viewership from sports channels as India failed to enter the next round of the cricket world cup.

Gas and petroleum distributor Aegis Logistics slipped 1.20% to Rs 115.10, after its board approved a proposal to acquire Kochi-based Konkan Storage Systems.

Batliboi jumped 8.85% to Rs 102.65, after it informed buying Quickmill, a Canadian machine tools company, for Rs 22 crore in an all-cash deal.

Bayer Diagnostics India surged 7.16% to Rs 604, on news Siemens AG would pay an interest of Rs 38.63 per share to public shareholders as part of a takeover deal with Bayer AG. Siemens will pay the interest over the original offer of Rs 629.45 per share to compensate for the delay in implementing the open offer, which was scheduled to be completed by September 2006. Thus, Siemens will effectively shell out Rs 668.08 per share of Bayer Diagnostics India.

Goodyear India rose 9.98 % to Rs 175.20, after reporting 200.8% growth in net profit in Q4 December 2006. Goodyear India has posted a net profit of Rs 10.20 crore in the quarter ended December 2006 as compared to a net profit of Rs 3.39 crore in the December 2005 quarter. Net sales for the December 2006 quarter rose to Rs 237.68 crore from Rs 190.96 crore in the December 2005 quarter.

Diversified firm DCM Shriram Consolidated surged 9.76% to Rs 94.50, after the company said it was considering the transfer or sale of its retailing business. DCM Shiram Consolidated (DSCL) said on Monday its board approved the transfer or sale of its rural retail division 'Hariyali Kisaan Bazaar.' The board also approved developing or selling the company's land holdings in five places including in Delhi.

A majority of Asian markets settled with gains, while European markets were trading mixed. The Nikkei average rose 0.24% to a one-month closing high on Monday, after gains in exporters including Fanuc were partly offset by losses in property shares such as Sumitomo Realty & Development Co. The Nikkei closed up 41.35 points, at 17,521.96, its highest closing since 28 February 2007. The broad TOPIX Index dipped 0.03% to 1,741.37.

The Hang Seng Index was up 73.21 points (0.73%), at 19,765.85.

US blue-chip stocks crept higher on Friday, as tension in the Middle East lifted oil prices and hence shares of energy companies. The Dow Jones industrial average rose 19.87 points, or 0.16%, to end at 12,481.01. The Standard & Poor's 500 Index inched up 1.57 points, or 0.11%, to finish at 1,436.11. But the Nasdaq Composite Index slipped 2.81 points, or 0.11%, to close at 2,448.93.

Most Indian ADRs closed in negative territory on Friday. In the technology space, Infosys dropped 1.25%, while Wipro advanced 0.78% and Satyam improved 0.04%. Tata Motors declined 1.63%. Among banking ADRs, HDFC Bank lost 0.16% and ICICI Bank gained 1.09%. In the telecom sector, Videsh Sanchar Nigam fell 3.52% and Mahanagar Telephone Nigam eased 0.15%.

FIIs were net buyers to the tune of Rs 678.50 crore on Friday (23 March 2007). As per provisional figures, FIIs were net buyers to the tune of Rs 58 crore today.

The next major trigger for the domestic bourses is Q4 March 2007 earnings, reports of which by corporates will start next month. Analysts expect Q4 results to be strong. Market men will closely watch what company managements have to say about the outlook for FY 2008.

The Indian bourses last week recorded their first weekly gain after five consecutive weekly losses till the week ended 16 March 2007, partly due to short-covering in derivatives and partly due to firm global markets.