Markets suffer severe blow on heavy unwinding

The markets which were steady till early afternoon trade, started declining in early after-noon trade, as fresh selling emerged. The fall kept on accentuating as the day progressed, with shares across the board seeing intense selling pressure. All the sectoral indices on BSE settled with losses, with shares from PSU, banking and oil & gas space bearing most of the brunt. As per market talks, there was basket selling in Nifty stocks by a couple of foreign brokerages. Cues from the global markets were not encouraging either. A broad based decline in European shares weighed on domestic bourses.

The 30-share BSE Sensex lost a heavy 279.08 points or 1.92% at 14,255.93. It opened higher at 14,551.53 and advanced to a high of 14,590.82, as buying interest continued for index pivotals. Sensex plunged to a low of 14,234.07, at the fag end of the day.

The NSE Nifty lost 86.40 points or 2.02% at 4,198.25

Index heavyweights suffered collateral damage. Shares that were leading the markets, in the earlier part of the day, could not withstand the fall and succumbed to selling pressure to finish with losses. Reliance Industries (RIL) and Oil & Natural Gas Corporation (ONGC), which have substantial weightage in key indices, Sensex & Nifty, dragged the market lower.

RIL lost 3.50% to Rs 1683.90, on 9.66 lakh shares. It slipped sharply from a high of Rs 1752. The government on Tuesday, 5 June 2007, approved RIL’s Haryana special economic zone, proposed to be spread over 10,000 hectares.

ONGC shed 3.17% to Rs 865.50 on 3.23 lakh shares. As per reports, Norwegian company Norsk Hydro is in talks with ONGC to pick up a share in the latter’s exploration block in the Krishna-Godavari basin. ONGC recently signed a major exploration deal with Brazilian company Petrobras, which also has a small stake in the block in which Norsk Hydro is interested.

The turnover spiked along with sharp fall. The total turnover on BSE amounted to Rs 5256 crore.

The market breadth, which indicates the overall health of the market, was quite weak as small-cap and mid-cap stocks succumbed to selling pressure. There were a little over 2 losers for every gainer on BSE. 1,733 shares declined as compared to 852 that advanced. 70 remained unchanged. This was in sharp contracts to that in morning session, when 895 shares had advanced and 631 declined.

The BSE Mid-Cap index declined 1.26% to 6,6181.91, while the BSE Small-Cap index slipped 1.29% to 7,389.76

A host of side counter were buzzing with activity. Peninsula Land (up 5.71% to Rs 535.90), Parekh Aluminex (up 7.11% to Rs 134), Rayban Sun Optics India (up 6.37% to Rs 115.30), ANG Auto (up 7.69% to Rs 307.50), and Shasun Chemical (up 6.42% to Rs 125.90) advanced.

On the other hand, side counters Zenith Infotech (down 9.07% to Rs 334.50), NIIT (down 7.89% to Rs 914.95), Gemini Communications (down 7.42% to Rs 400.05), Logix Microsystems (down 5% to Rs 265.30), Ceat (down 5.12% to Rs 168.50), Greenply (down 6.54% to Rs 128), and Birla Corporation (down 6.52% to Rs 223.05) declined.

Among the Sensex pack, 26 dipped and the remaining four advanced

Aluminium and copper major Hindalco Industries was up 2.23% to Rs 149.25 on 16.65 lakh shares. It was the top gainer from the Sensex pack. The market has been rife with speculation, this week that Alcan may team up with Sterlite Industries to bid for Hindalco.

Wipro declined 0.73% to Rs 531.25 on total volumes of 50.79 lakh sharesh. Multiple block deals were struck on the Wipro counter, prominent being a block deal of 45.21 lakh shares executed at Rs 537.50 on BSE by 12:43 IST. It was the second most top traded counter on BSE with turnover of Rs 273.31 crore.

IT pivotals were pretty strong throughout the day, but finally pared gains on selling pressure. Indian rupee eased on Wednesday, 6 June 2007, amid concerns of central bank intervention. But the fall was limited due to exporter buying.

The BSE IT index slipped 0.3% to 4,872.64. Satyam Computers (up 0.36% to Rs 465), Infosys Technologies (down 0.35% to Rs 1935) and TCS (down 0.89% to Rs 1197) declined.

Patni Computer Systems was down 0.55% to Rs 537.80, after rising to high of Rs 567. The stocks gained on reports that UK-based private equity firm Apax Partners is interested in buying a controlling stake in the company for over $800 million. Meanwhile, private equity firm General Atlantic is looking to sell its 16% in the company. Apax is willing to pay an 8-10% premium over Patni's existing share price for the stake.

MphasiS BFL rose 1.59% to Rs 312.25 after a block deal of 2.50 lakh shares was struck on the counter on BSE at Rs 310.50 by 10:16 IST.

IT stock have not performed in the market's recent surge due to the strong rupee. A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion’s share of revenue from exports to the US.

Reliance Communications rose 0.87% to Rs 515. and Hindustan Lever (up 0.23% to Rs 196) were the other gainers.

Pharma major Ranbaxy Laboratories was the top loser among the Sensex constituents. It slumped 3.77% to Rs 377.50, on 1.72 lakh shares.

Banking stocks, which had performed well for previous two sessions, settled with losses, on profit booking. State Bank of India (down 3.22% to Rs 1390), ICICI Bank (down 2.81% to Rs 913), and HDFC Bank (down 2.12% to Rs 1135), declined.

Tata Motors shed 3.10% to Rs 689. As per reports, Tata Motors is planning to cut production of some trucks at its plant in Pune as higher interest rates, caused by rising inflation, force transport companies and tour operators to postpone or drop purchase plans. It recently had said that expensive vehicle loans led to fall in sales of its commercial vehicles by about 6% in May 2007 over that recorded in the same period last year. Sales of medium and heavy commercial vehicles, however, fell more sharply by about 17% in May. 2007.

Maruti Udyog (down 3.22% to Rs 774), Hero Honda (down 0.15% to Rs 715), and Bajaj AUTO (down 1.65% to Rs 2212), also slipped. The BSE Auto Index lost 1.9% to 4,868.44.

Reliance Energy (down 3.04% to Rs 533.80), HDFC (down 3.04% to Rs 1840) and Bhel (down 3.15% to Rs 1338.90) declined on profit booking.

State-owned Steel Authority of India (Sail) plunged 5.07% to Rs 132 on reports it has cut prices of various products by up to Rs 300 per tonne. Prices have been lowered of galvanised products (GPGC), cold rolled (CR) steel and CR coils among other items. Sail also cut prices of pig iron, a major input for steel making, by up to Rs 500 per tonne. The new prices have come into effect from 5 June 2007.

Tata Steel (down 3.60% to Rs 618), JSW Steel (down 3.66% to Rs 577), Sterlite Industries (down 3.45% to Rs 537) and Maharashtra Seamless (down 1.47% to Rs 595.30) were the other losers from the steel pack. The BSE Metal Index declined 2.2% to 10,414.47.

State-run power generation major NTPC declined 2.23% to Rs 156, after a block deal of 20 lakh shares was struck in the counter on BSE at Rs 162 per share. On BSE, 33.28 lakh shares were traded in the scrip. As per reports, the company is planning a follow-on equity issue to fund its upcoming power plants. Reports also added that the company is planning a bonus issue.

Engineering & Construction major L&T edged lower by 1.30% to Rs 1,919.90. Citigroup has upgraded its rating on the stock to buy from hold and raised its 12-month price target to Rs 2,360 from Rs 1,733 earlier.

Automobile Corporation of Goa rose 1.35% to Rs 490, after 10.6 lakh shares changed hands in the stock in a block deal on BSE at Rs 475 each. The scrip touched an all-time high of Rs 555 following the block deal. The block deal constituted 16.5% of the company's equity capital. The large block deal represents transfer of shares between two Tata group companies, Tata Motors and Tata International whereby the former has acquired the stake of the later in the company.

Auto components maker Mahindra Forgings (MFL) surged 20% to Rs 281.20 after its board approved for merging three unlisted group firms with itself. The announcement was made after trading hours on Tuesday, 5 June 2007. The three firms to be merged with MFL are Mahindra Stokes Holding, Mahindra Forgings Overseas and Mahindra Forgings Mauritius.

Shareholders of Mahindra Stokes would receive 20 shares of MFL for 103 shares held. Mahindra Forging Overseas shareholders would get 20 shares of MFL for 49 shares held and Mahindra Forgings Mauritius shareholders would get 20 shares of MFL for 73 shares held.

Siyaram Silk was up 2% to Rs 143 after reporting a 75.6% surge in net profit in Q4 March 2007 to Rs 5.78 crore as against Rs 3.29 crore in Q4 March 2006. Sales rose 8.88% to Rs 131.79 crore (Rs 121.04 crore).

Net profit scaled up 23.97% to Rs 20.07 crore in the year ending March 2007 as against Rs 16.19 crore in FY 2006. Sales moved up 13.31% to Rs 446.71 crore (Rs 394.25 crore).

PSL advanced 4.16% to Rs 249.20 after the steel pipe maker received government’s nod for energy special economic zone in Gujarat. The proposed zone, with common infrastructure and tax-breaks, would come up in Gujarat.

Praj Industries edged up 0.92% to Rs 497.10 after fixing book closure for bonus issue entitlement. After trading hours on Tuesday, 5 June 2007, Praj Industries announced that the register of members and share transfer books of the company will remain closed from 20 to 25 July, 2007 (both days inclusive) for the purpose of bonus issue. The company has announced a liberal 1:1 bonus.

BASF India dropped 7.77% to Rs 252.25 after the chemicals maker reported a 26% fall in net profit in Q4 March 2007 to Rs 3.67 crore from Rs 4.98 crore in Q4 March 2006. Sales moved up 10.68% to Rs 160.70 crore (Rs 145.19 crore). Net profit rose 10.31% to Rs 50.09 crore in the year ending March 2007 from Rs 45.41 crore in FY 2006. Sales scaled up 12.59% to Rs 768.53 crore (Rs 682.57 crore).

Tamil Nadu Newsprint and Papers gained 1.88% to Rs 95.05. On 4 June 2007, the company announced that its Rs 565 crore mill development plan (MDP) will complete by August 2007. The plan would enable the company to increase the pulp production capacity to 800 tons per day (TPD). Exide Industries advanced 1.74% to Rs 46.75. Earlier in end-April 2007, Exide Industries announced its Rs 450 crore expansion plan, spread over next three years to double its production of automotive batteries, two-wheeler batteries and batteries for industrial applications in phases by 2010.

There are concerns that investors may pull out funds from the secondary market to invest in IPOs, which are scheduled to hit the market later this month. Reality major DLF is mopping up between Rs 8,750 crore and Rs 9,625 crore at the proposed price band of Rs 500 - Rs 550 per share. DLF IPO opens for subscription on 11 June 2007 and ends on 14 June 2007.

ICICI Bank had, on 15 May 2007, filed a draft prospectus with Sebi to seek approval for raising Rs 17,500 crore through an equity issue in the domestic and overseas market.

All the European indices were trading with losses. They fell for a third day in a row on Wednesday as investors braced for possible warnings on eurozone inflation from the European Central Bank chief after a policy meeting later in the session. There are two seperate meetings of European Central Bank (ECB) and Bank of England (BOE) scheduled today. As per market expectations, ECB will raise interest rate to 4% from the present 3.75%, while BOE is expected to keep rates unchanged.

Most major Asian share markets inched lower and the dollar slipped on Wednesday, after comments from US Federal Reserve Chairman Ben Bernanke dashed hopes for an interest rate cut this year in Asia's top export market. Hang Seng was down 0.11% to 20,818.61 while Nikkei 225 index slipped 0.07% to 18,040.93.

The Shanghai Composite Index in China rose 0.24% at 3,776.37 after a strong intra-day rebound on Tuesday, 5 June 2007. Chinese stocks had recovered on Tuesday on market talks that the government would soon issue a policy statement designed to restore investor confidence. The Shanghai Composite Index has fallen more than 10% from a record high since Chinese authorities hiked a stock-trading tax a week ago to cool a market that had almost tripled in value over the past year.

US stocks edged lower on Tuesday, 5 June 2007, after comments from Federal Reserve Chairman Ben Bernanke and a strong reading on the service sector suggested the central bank has little reason to lower interest rates. The Dow fell 80.86, or 0.59%, to 13,595.46, after earlier falling more than 100 points. Broader indexes also retreated. The Standard & Poor's 500 index fell 8.23, or 0.53%, to 1,530.95, while the Nasdaq composite index shed 7.06, or 0.27%, to 2,611.23. Bernanke said inflation was still a major concern.

As per provisional data, FIIs were net sellers to the tune of Rs 148 crore on Tuesday, 5 June 2007. Domestic institutions were net buyers to the tune of Rs 48 crore on Tuesday.

Oil prices rose Wednesday, 6 June 2007, amid forecasts that the strongest storm to hit the Arabian Peninsula in 60 years was barreling toward Iran, a major oil producer, and the oil-rich Persian Gulf. Light, sweet crude for July delivery added 23 cents to $65.84 a barrel in Asian electronic trading on the New York Mercantile Exchange, mid-morning in Singapore. The contract had slipped 60 cents to settle at $65.61 a barrel Tuesday.