Sensex sheds 111 points as IT stocks slump; RIL gains

Market ended a volatile session on a weak note as investors preferred booking profits in absence of any major triggers. Positive global cues lifted sentiment in early trade. In contrast, in late trade weak European markets pushed the domestic bourses lower.

Software, banking and telecom stocks were major losers. However, oil & gas and capital goods stocks remained strong. Reliance Industries soared. Turnover on the bourses declined sharply today.

The Sensex resumed on a positive note at 19,552.53 points above its last close of 19,400.67 and by mid-morning trades accumulated gains of 277.83 points on all-round buying to touch day's high of 19,678.50. Although the index managed to sustain in green amid volatility till afternoon, intense selling due to steep fall in European markets later dragged the markets lower.

The 30-share BSE Sensex ended down 110.84 points or 0.57% at 19289.83. Sensex touched a low of 19,249.47 in late trade, at which it had lost 151.20 points for the day.

The broader S&P CNX Nifty was down 4.15 points or 0.07% at 5782.35.

The market breadth was negative. On BSE, 1028 stocks advanced, while 1674 stocks declined and 77 stocks remained unchanged. 20 out of 30 stocks declined from the Sensex pack.

BSE clocked a turnover of Rs 6837 crore, lower than Tuesday (6 November 2007)’s Rs 9922 crore.

Nifty November 2007 futures were at 5762, at a discount of 20.35 points over spot closing of 5782.35.

NSE's futures & options segment clocked a turnover of Rs 62,678.11 crore, lower than Tuesday's Rs 82,952.01 crore.

The BSE Mid-Cap index was down 29.34 points or 0.37% at 7,985.96, outperforming Sensex. BSE Small-Cap lost 107.90 points or 1.10% at 9,695.13, underperforming Sensex.

The BSE IT index lost 197.27 points or 4.34% at 4,343.42. Major software stocks declined as rupee climbed to its highest since March 1998.

Infosys Techonogies, India's second largest software exporter, lost 5.78% to Rs 1743.85. Wipro (down 2.05% to Rs 477.35), Satyam Computer (down 4.03% to Rs 434.85), TCS (down 0.63% to Rs 998.25), edged lower. A rise in rupee hits IT companies as they get more than half of their revenue from the United States.

The BSE Auto index settled 18.15 points or 0.34% higher at 5,295.39. Amtek Auto jumped 4.17% to Rs 469.85, Mahindra & Mahindra gained 2.54% to Rs 759.80, Maruti Suzuki India rose 2.43% to Rs 996.80 and Hero Honda Motors grew 1.81% to Rs 680.10.

Telecom stocks declined. Reliance Communications lost 2.50% to Rs 726.75 and Bharti Airtel shed 1.98% to Rs 900.25.

The Department of Telecom (DoT), on Tuesday, 6 November 2007, announced setting up of a committee to revise the spectrum allocation criterion for existing operators in a scientific and practicable manner. It may be recalled that Telecom Engineering Centre had recently finalised spectrum allocation criterion, which had made it significantly more difficult for operators to get additional spectrum.

The BSE Bankex fell 166.29 or 1.54% at 10,620.22. HDFC Bank fell 5.16% to Rs 1617.95, ICICI Bank dropped 2.98% to Rs 1203.80, and Canara bank lost 3.36% to Rs 271.85. State bank of India rose 2.66% to Rs 2267.45.

The BSE Capital Goods gained 41.07 points or, 0.21% at 19,738.36. Bharat Heavy Electrical (Bhel) jumped 3.55% to Rs 2821, Jaiprakash Associates rose 1.66% to Rs 1551.25 and BEML gained 0.29% to Rs 1590. Larsen & Toubro (L&T) lost 0.27% to Rs 4114.50. L&T today said it had priced its $400 million global depositary shares issue at $100 each. Each GDS represents one equity share of the company.

Siemens fell 1.15% to Rs 1757.80. The company secured an order worth Rs 87 crore for supplying electricals to Rashtriya Nigam Ispat.

The BSE Oil & Gas index rose 298.97 points or, 2.63% at 11,688.18. Oil & natural Gas Corporation of India (ONGC) fell 0.88% 1,289.25.

GAIL India soared 6.51% to Rs 457.30 on reports that the company is looking at acquiring stake in a Nigerian LNG plant and has expressed interest in setting up a gas-based petrochemical plant in Nigeria.

Reliance Industries was up 4.04% to Rs 2762.65. The company has struck gas in its block KG-OSN-2001/1 (KG-III-5) in the Krishna Godavari offshore basin. The company is still evaluating the commerciality of the discovery.

Sterlite Industries (India) was up 6.58% to Rs 1056.95. The company said today, 7 November 2007, it intends to participate in coal-based power generation projects and other ancillary activities through its subsidiary, Sterlite Energy.

National Thermal Power Corporation (NTPC) was up 0.61% to Rs 241. The company declared after trading hours on Tuesday, 6 November 2007, it has entered into an agreement with the Ministry of Railways for setting up a joint venture company namely "Bhartiya Rail Bijlee Company" for setting up a captive power plant of 1000 mega watt at Nabinagar, Bihar. NTPC will contribute 74% of equity and Indian Railways will hold the balance 26% equity. 90% of the power from the plant will be supplied to Indian Railways and 10% to others.

ABG Heavy Industries (ABG) fell 2.26% to Rs 481.05. The company has acquired the world's largest crane with a capacity of 3,200 metric tonne from Terex-Demag GMBH & Co of Germany. The crane, acquired for an undisclosed amount, will be used for the entire infrastructure requirements in refineries, petrochemicals, nuclear and bridge construction facilities.

Lupin was up 1.33% to Rs 555.10. The company reportedly plans to acquire a speciality pharmaceutical company in the United States to expand its portfolio of brands in the paediatrics segment.

Reliance Natural Resources clocked the highest turnover of Rs 852.21 crore on BSE. Reliance Petroleum (Rs 790.58 crore), Reliance Industries (Rs 222.28 crore), Larsen & Toubro (Rs 191.88 crore) and Reliance Energy (Rs 182.10 crore), were other turnover toppers in that order.

Reliance Natural Resources registered highest volumes of 5.56 crore shares on BSE. Reliance Petroleum (3.60 crore shares), Ispat Industries (3.37 crore shares), IFCI (82.97 lakh) and Facor Alloys (81.85 crore shares), were other turnover toppers in that order.

European equities dropped, wiping out gains registered earlier during the day as the euro hit a fresh record high above $1.47 stoking worries over the impact on corporate earnings. France’s CAC 40 was down 0.81% to 5,663.04, UK’s FTSE 100 was down 0.95% to 6,413.30 and Germany’s DAX was down 0.49% to Rs 7,788.97.

Asian markets were mixed. Hong Kong’s Hang Seng was up 0.92% at 29,708.93. Taiwan’s Taiwan Weighted was up 0.08% at 9,300.22. Singapore’s Straits Times was down 0.27% at 3,673.01. Japan’s Nikkei 225 was down 0.94% at 16,096.68. South Korea’s Seoul Composite was down 0.54% at 2,043.19.

On Wall Street, energy stocks such as Exxon Mobil gained ground on Tuesday, 6 November 2007, helping send the blue chip Dow up 0.9%. The tech-heavy Nasdaq Composite Index advanced 1.1%.

Foreign institutional investors (FIIs) bought shares worth a meagre Rs 5.10 crore on Tuesday, 6 November 2007. FIIs sold shares worth a net Rs Rs 656.90 crore on Monday, 5 November 2007, the day when Sensex had lost 385.45 points or 1.93% to 19,590.78 on renewed fears over the impact of US credit crisis after US financial giant Citigroup said it may suffer up to $11 billion in write-downs for subprime losses. FIIs had sold shares worth a net Rs 761.40 crore on Friday, 2 November 2007.

Recent FII sales/slowdown in inflow comes when Securities & Exchange Board of India (Sebi) put restrictions on issue of participatory notes (PNs) and it also directed unwinding of some exiting PNs within 18 months. The Sebi restrictions on use of PNs came into force from 25 October 2007.

Massive FII inflow had send the market surging in the last two months. FII inflow was a robust in the last two months - at Rs 16132.60 crore in September 2007 and Rs 20590.90 crore in October 2007. FII inflow had surged as huge liquidity infused by a steep 50 basis points cut in Fed funds rates in mid-September 2007 found its way into emerging markets.

The Q2 September 2007 results of India Inc.were decent to strong which means that strong fundamentals would support Indian equities at declines. At the macro level, the India’s economy is expected to post decent to strong growth for a long period of time, mainly due to favourable demographics. Mutual funds are said to be sitting on a strong cash pile of about Rs 14000 crore and they may step up buying if and when there is a steep correction on the bourses.

At current 19289.83, Sensex trades at a PE multiple of 18.37 to 19.29 based on projected FY 2009 EPS of Rs 1000-to-Rs 1050 for 30 Sensex companies.