Sensex finishes 117 points behind

The Sensex, which had opened firm, kept on declining as the day progressed. Adamant investors refused to desist from selling. But the final loss was surprisingly much short of the showdown expected at one point of time. Value-buying at the lower levels pulled the Sensex out of the woods, albeit partially, in the late-afternoon session.

The 30-share BSE Sensex settled 117.34 points (0.92%) lower, at 12,579.75. It recovered partially from an intra-day low of 12,390.46.

The barometer index had opened higher, at 12,792.90, as buying continued following a 282-point spurt on Wednesday (7 March 2006). It had also surged to an intra-day high of 12,902.18, tracking firm Asian markets. The Sensex also suffered from high volatility during the day, and swung 512 points.

The S&P CNX Nifty slipped 28.80 points (0.79%), to finish at 3,626.85.

Technical analysis says if the Sensex were to breach 12,300 levels, it could lead the market towards a free fall. The Sensex can touch 11,000 levels on the lower side. On the contrary, the BSE benchmark has strong resistance at 13,200 levels.

The correction is expected to continue for some time now, and will be difficult to predict which way the market is headed.

The total turnover on BSE amounted to Rs 3512 crore, indicating lacklustre trade. The turnover was Rs 3816 crore on Tuesday (6 March 2007)

The market-breadth, a yardstick of the overall health of the market, underwent a complete reversal in line with the broader indices. It was strong in the opening session, but was unable to sustain the momentum. It turned extremely weak, as selling began for small-cap and mid-cap stocks.

Shares from the small-cap and mid-cap space are prone to selling, and decline much sharply than their large-cap peers in times of sharp correction on the exchanges. This mostly happens due to a lack of liquidity in that basket of stocks.

The BSE Small-Cap Index finished at 6,088, down 2.74%, while the BSE Mid-Cap Index settled at 5,114, down 2.01%.

There were close to 3.5 losers for every gainer on BSE. Against 1,990 shares declining on BSE, only 600 advanced. As many as 40 scrips also remained unchanged.

Among the 30-Sensex pack, 20 declined while the rest advanced.

Cement shares saw renewed selling. The government said it will review the increase in cement prices after companies passed on higher excise duties to customers. Commerce Minister Kamal Nath said he will hold meetings with ministry officials to ensure there is “no profiteering” by cement makers.

The government may also consider banning cement exports if such a move would help bring down prices, Nath added. Cement makers are unwilling to lower prices following a duty increase last week, but have pledged to raise capacity to help battle inflation.

India raised the excise duty on cement in the Union Budget for 2007-08, prompting firms to increase prices by Rs 10 - Rs 12 per 50 kg bag in some states, 1 March 2007 onwards.

While the government cannot prohibit cement companies from passing on the increase in the levy to customers, it is trying to find a “way out” of the situation, the minister explained.

Gujarat Ambuja Cements (GACL) plunged 8.52% to Rs 104.10, on a volume of 32.74 lakh shares. It was the top loser. The GACL scrip had also touched a low of Rs 100.

ACC (down 4.03% to Rs 820), UltraTech Cement Company (down 1.86% to Rs 805.55), Shree Cement (down 2.51% to Rs 1138), India Cements (down 5.75% to Rs 152.50) and Birla Corporation (down 2.60% to Rs 219) also plunged.

Frontline IT stocks slipped on renewed selling. The BSE IT Index lost 67.24 points (1.36%), to 4,894.70. Satyam Computers (down 0.46% to Rs 432), Infosys Technologies (down 1.30% to Rs 2089) and Wipro (down 3.92% to Rs 558) advanced.

Ranbaxy Laboratories dropped 3.26% to Rs 311.40, despite the company's subsidiary, Terapia, in Romania, reporting 50% growth in sales for 2006. Ranbaxy also informed that Terapia had won approval for 20 new products, which it plans to launch soon.

Indian bulk drug major Cipla was the top gainer, up 5.12% to Rs 233, on a volume of 3.45 lakh shares. The scrip had also surged to an intraday high of Rs 236.50.

Dr Reddy’s (up 2.85% to Rs 638.50), Tata Motors (up 2.57% to Rs 745), and Reliance Communications (up 3.25% to Rs 414) were the other gainers.

Engineering and construction major L&T gained 2.48% to Rs 1463, on reports that the company was in talks with Japan's Toshiba Corporation for a joint venture for power plants and equipments in India.

As per the deal, L&T would hold majority stake in the joint venture and would invest about $ 173 million to build plants for steam turbines and power generators. The joint venture aims to have an annual turnover of 20 billion yen in five years. L&T's entry into this segment catering to the power sector follows its recent tie-up with Mitsubishi Heavy Industries, another Japanese major, for manufacture of boilers for power projects. This is a good move from L&T's point of view. It will help the company take advantage of the huge investments coming up in the country's power sector.

Index heavyweight and India's top private oil company, Reliance Industries (RIL), was down 0.57% to Rs 1292. The stock had, however, eased from the day’s high of Rs 1331, while its low was at Rs 1262.10. As many as 14.05 lakh shares had changed hands in the heavyweight counter.

There are reports that RIL will transfer its overseas oil assets to a new holding company, to reduce risk on its balance sheet as many of these are located in politically risk-prone areas. Reports say the new company will first take over Reliance's assets in West Asia. RIL was also scouting for opportunities in oil-rich nations including Russia and Central Asian countries. While RIL has won an exploration block in Iraq in conjunction with ONGC Videsh, it has interests in Yemen and Oman as well. The private sector oil behemoth has also entered into an exploration and cooperation agreement with Ecopetrol, Colombia's national oil company.

RIL, which had scheduled a board meet on 10 March 2007, to consider interim dividend will also consider and recommend the amalgamation of Indian Petrochemicals Corporation (IPCL) with the company.

MindTree Consulting settled at Rs 620.30 on BSE, a sharp premium of 45.88% over the IPO price of Rs 425. The stock debuted at Rs 599. It hit a low of Rs 575.20 and a high of Rs 678.80. A huge 87.66 lakh shares had changed hands in the counter.

The IPO of MindTree Consulting had received an overwhelming response from a cross-section of market participants, institutions, high networth individuals (HNIs) and retail investors. The IPO of the IT firm got bids for 57.76 crore shares – 103 times the issue size of 55.9 lakh shares. The IPO was priced at the upper end of Rs 365-Rs 425 price band.

Broadcast Initiatives settled at Rs 69.40, a steep discount over the IPO price of Rs 120. The stock debuted at a discount, at Rs 117, and struck a high of Rs 118. The scrip had also dropped to a low of Rs 66.60. As many as 1.17 crore shares changed hands in the counter on BSE. The IPO was priced at the upper end of the Rs 100 - Rs 120 price band.

Oriental Trimex, engaged in marble and granite business, settled at sharp discount at Rs 29.45 on BSE, over the IPO price of Rs 48. A huge volume of 1.54 crore shares was traded on the BSE. The Oriental Trimex scrip got listed on BSE at Rs 42, down 14.28% compared to its IPO price of Rs 48. The scrip had also touched a high of Rs 47, and fallen to a low of Rs 28.20. The IPO of Oriental Trimex scraped through with bids 1.05 times the issue size. The company offered 94 lakh equity shares (excluding promoter contribution of 6 lakh equity shares) to investors.

Evinix Accessories closed at Rs 73.75 on BSE, a sharp discount over the IPO price of Rs 120. The stock had debuted at Rs 110, dropped to a low of Rs 70.25 and attained a high of Rs 128. 91.92 lakh shares changed hands in the counter on BSE.

Suzlon Energy rose 2.33% to Rs 1035, after its target company, Germany's REpower, reported a turnaround in 2006 on Tuesday. The Suzlon Energy scrip had tumbled in early-February 2007 on concerns that the big-ticket acquisition would put a short-term strain on its financials.

REpower on Tuesday reported a profit for 2006, as a restructuring programme took effect. REpower's earnings before interest and tax (EBIT) were 12.2 million euros ($16 million) in 2006, up from a loss of 4.3 million euros the year before. Net profit rose to 7.1 million euros from a loss of 6.8 million euros in 2005, REpower informed.

REpower also recommended the offer made by Suzlon Energy to the German firm's shareholders, on Tuesday. “The supervisory board and management of REpower welcome the offer from Suzlon and recommend it, as Suzlon will be a suitable strategic partner for REpower for increased growth in the international windpower industry,” REpower said in a statement.

Ashok Leyland (ALL) slipped 0.92%, to Rs 37.80, after advancing to a high of Rs 43, on reports that it had won the race for a stake of over 43% in Punjab Tractors (PTL), beating tractor stalwarts Mahindra & Mahindra (M&M) and Tafe, in the process. According to unconfirmed reports, ALL has placed the highest bid of Rs 380 per share for acquiring the combined equity of Actis and the Burman family (a little over 43%) in PTL.

If ALL does eventually pull off the deal, it will have to make a mandatory open offer of another 20% to shareholders, thus becoming a majority shareholder in PTL. An announcement about PTL's stake sale is expected shortly.

Patni Computer lost 3.5% to Rs 399.95, after the RBI on Tuesday banned foreign portfolio investment in the counter without prior permission. The FII limit for the scrip is 24% and it has already reached a threshold 22%. FII-holding in the scrip was 20.62% (at-end December 2006) compared to 19.29% at end-September 2006.

The Nikkei 225 Index shed 0.47% on Wednesday as shares of leading exporters such as Canon Inc were hit by continuing concerns about the outlook for the US economy. But losses were limited as investors picked up stocks dependent on domestic demand such as real estate firm Sumitomo Realty & Development Co. The Nikkei 225 index settled 79.88 points lower at 16,764.62.

The Hang Seng Index was down 139.92 points (0.73%), to 18,918.64.

US stocks too extended their recovery on Tuesday. The Dow Jones industrial average rose 157.18 points, or 1.30%, to 12,207.59. The Standard & Poor's 500 Index gained 21.29 points, or 1.55%, to 1,395.41. The Nasdaq Composite Index led the rebound on Wall Street, climbing 44.46 points, or 1.90%, at 2,385.14. Stocks shrugged off US data showing a big drop in pending US home sales, and a decline in factory orders.

Equities across the globe had declined sharply over the past few days due to worries pertaining to the US economy, volatile markets in China, and more frequently, the unwinding of yen carry trades, or when investors borrow the yen to take advantage of low interest rates in Japan, and then invest in higher-yielding assets. The key data this week is the US non-farm payroll for February 2007, due on Friday (9 March 2007).

As per provisional data, FIIs were net buyers to the tune of Rs 28 crore today. FIIs were net sellers of Rs 570.40 crore on Tuesday 6 March 2007.

Oil prices edged higher in Asian trading today, ahead of a US government inventory data which is expected to show decline in gasoline stocks for the fourth week in a row. Light, sweet crude for April delivery rose 4 cents to $60.73 a barrel in electronic trading on the New York Mercantile Exchange midmorning in Singapore. The Brent crude contract for April gained 7 cents to $61.46 a barrel on London's ICE Futures Exchange.

The contract rose 62 cents to settle at $60.69 a barrel on Tuesday (6 March 2007) as global stock markets recovered and traders bid up oil contracts. Major Asian markets rose for a second day today.

Trading on BSE and NSE was stopped from 11:45 IST to 12:25 IST due to sun outage. The staggered trading schedule will be applicable till 19 March 2007.

In a major development, Singapore Exchange (SGX) is close to buying a stake of about 5% in India's premier exchange - the Bombay Stock Exchange (BSE), news reports said. An announcement was likely later in the day. In February 2007, Germany's Deutsche Boerse bought 5% stake in the over 125-year-old stock exchange in a deal that valued the BSE at $910 million.

This amount is far below the $2.3 billion valuation of the National Stock Exchange (NSE), BSE's rival, for little more than a decade, after NYSE Group and others including Goldman Sachs paid $460 million for stakes totaling 20% in January 2007.

General Atlantic and SoftBank Asian Infrastructure Fund were the others parties, each of whom bought 5% stake -- the maximum permitted under Indian laws -- in the NSE.

Analysts say the higher valuation for NSE was due to higher trading volumes, especially in the increasingly popular derivatives segment, although the country's benchmark stock index is on the BSE. On an average, NSE's cash segment trading volumes have been 50% higher than that of BSE's.

The acquisition of stakes in Indian bourses by foreign exchanges follows a series of agreements between international exchanges, which are under pressure from customers to offer global services and cut fees.

In February 2007, Nasdaq Stock Markets Inc., a rival of the NYSE Group, failed in its bid to take over the London Stock Exchange, Europe's largest share market. Earlier, the NYSE Group announced a strategic alliance with Asia's biggest bourse, the Tokyo Stock Exchange.

Nasdaq has signed memorandums of understanding (MOUs) with the Shanghai Stock Exchange, Korea Stock Exchange and Jasdaq, Japan's biggest market, for initial public offerings