Market slumps on heavy unwinding

The market settled the day with sharp losses following a late sell-off in index pivotals. Profit booking continued for the second straight day. The market was barely able to sustain itself in the positive territory. Weak global markets played spoilsport.

Asian markets were trading weak, while all the European markets declined. The Hang Seng index lost 0.22% and the Nikkei 225 index slipped 0.05%. The Shanghai Composite lost 0.54%.

The BSE 30-share Sensex dipped a sharp 145.15 points to 14,218.11. Ever since it opened today, 24 May 2007, on a bearish note at 14,344.70, it kept on hitting fresh intra-day lows as fresh selling emerged at every small rise, with the last low being recorded at 14,174.05. Its high for the day was at 14,389.66

The National Sock Exchange’s Nifty ended 4,204.90, down 41.30 points or 0.97% from its previous close.

The market, going great guns in the past five trading sessions (from 16 –22 May), took a breather on 23 May 2007 as anxious bulls started liquidating positions in the last hour of trade on the benchmark index's inability to hit a new all-time high. The Sensex had rallied a sharp 525 points, or 3.75%, from 13,929.33 on 15 May 2007 to 14,453.72 on 22 May 2007.

The market is worried about big IPOs lined up June onwards. It is believed to be the highest-ever capital mobilisation. Lot of liquidity will be sucked off from the secondary market. This will make its way to the primary market. Although the exact size and date of the initial public offering (IPO) of DLF and the follow-on issue of ICICI Bank are yet to be announced, marketmen expect these offers will compete head to head for investors’ fund of over Rs 24,000 crore next month.

Real estate major DLF, which took four months to receive market regulator Sebi’s clearance for its public issue, is expected to hit the market by end June with an over-Rs 13,000-crore issue.

The country’s second largest bank, ICICI Bank, has sought approval from Sebi to sell Rs 17,500 crore of shares to local and overseas investors. The bank has set a target of launching the issue in June. The offer may be raised to Rs 20,100 crore depending on demand, the sale document said.

Meanwhile, the total turnover on BSE amounted to Rs 4,461.96 crore, while NSE F&O turnover was at Rs 34762.53 crore. Total market wide turnover was Rs 48755.46 crore

The market breadth, which reflects the overall health of the market, settled weak, with over 1.5 losers for every gainer, as selling continued in small- and mid-cap stocks. On BSE, 1,564 shares declined compared to 1,017 that advanced, while 89 remained unchanged. At 10:30 IST, the breadth was positive, with 878 shares advancing as compared to 734 that declined.

The BSE Mid-cap Index Index settled 8.37 points, or 0.14%, lower at 6,108.84, and the BSE Small-cap Index declined 35.80 points, or 0.49%, at 7,237.55.

Among the Sensex pack, 24 declined while the rest advanced.

Tata Steel was the top loser, down 4.04% to Rs 632.25 on 14.20 lakh shares. It also touched a low of Rs 628 in intra-day trade. The Reserve Bank of India (RBI) today (24 May 2007) stopped the purchase of Tata Steel shares by foreign institutional investors (FII) as the foreign investment in the world's sixth largest steel maker reached the permissible limit of 22%.

Increasing interest of foreign investors in Tata Steel, following the acquisition of Anglo-Dutch steel maker Corus, had pushed up the FII stake in the company by more than 4% in the last one-and-half month. The FII interest has continued to increase in the steel giant, though a large number of retail investors exited the company following the dip in share prices of Tata Steel after the acquisition of Corus. The FII stake in the company was 17.24% end March 2007.

Other shares from the metal pack were not spared either. The BSE Metal Index lost 1.6% to 10,462.28, and was the top loser among the sectoral indices on BSE. Sterlite Industries (down 0.98% to Rs 533), JSW Steel (down 2% to Rs 608.50), Hindalco (down 1.06% to Rs 144), and Sesa Goa (down 0.67% to Rs 1683.25) were among the losers.

Telecom pivotals Reliance Communications (RCom) and Bharti Airtel plunged for the second straight day following massive cut in tariff, which may impact their profitability.

RCom slashed roaming tariffs for outgoing calls by upto 70% to Rs 0.40 per minute on select plans. As a result, the stock suffered a steep loss of 4.01% to Rs 490, with a high 21.27 lakh shares changing hands on the counter.

Bharti Airtel followed, losing 2.14% to Rs 831 on reports that it would also announce price cuts within the next couple of days. On BSE, 3.09 lakh shares were traded in the counter.

Shares from the banking and financial space saw profit booking after seeing a steady rally for the past few sessions. Also there were markets of hike in the CRR going ahead. The BSE Bankex was down 1.5% at 7,479.29. SBI (down 2.15% to Rs 1277.70), HDFC Bank (down 2.79% to Rs 1087) and HDFC (down 2.79% to Rs 1751) declined.

ICICI Bank, which held firm and had hit a high of Rs 931, succumbed to selling pressure in the end. It lost 0.73% to Rs 909.90 on 1.69 lakh shares. Market speculation is the RBI will allow Temasek and Government of Singapore Investment Corporation (GIC) to acquire 10% equity each in the country’s largest private sector lender ICICI Bank as a `one-off case'.

Index heavyweight Reliance Industries (RIL) slumped 2.20% to Rs 1717 on 8.49 lakh shares. It slipped from high of Rs 1761. Even as Singur and Nandigram simmer in West Bengal, signs of serious trouble are evident in Raigad district of Maharashtra where RIL is setting up a 14,000-hectare special economic sone (SEZ), billed to be the biggest in Asia.

The worst did not seem to be over for Bajaj Auto counter, as it declined for the sixth consecutive session, ever since it declared a scheme of demerger along with its poor set of results, during trading hours on 17 May 2007, which triggered a flurry of rating downgrades by brokerage houses. Disappointment about the post-demerger structure and lack of clarity about future business plans were cited as the main reasons for the downgrades.

The stock lost 1.07% today to Rs 2,160. It has eroded 20.60% from Rs 2718.60 on 11 May, till today.

Prior to this, Bajaj Auto was on a losing streak, declining a little under 19% in the previous four trading sessions after the surprise revelation that Allianz — Bajaj’s partner in its two insurance ventures — has a ‘call option’ to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.

The sporadic selling began after the company unleveled its demerger scheme, during trading hours on 17 May 2007, along with its results, which triggered a flurry of rating downgrades by brokerage houses. Disappointment about the post-demerger structure and lack of clarity about future business plans were cited as the main reasons for the downgrades.

Most analysts expected Bajaj Auto to remain the majority partner, while allowing Allianz to raise its stake up to 49%. They see a high possibility of the government raising foreign investment limit in insurance sector to 74% and Allianz exercising the option to hike the stake.

The insurance business of Bajaj Auto was valued at around Rs 800 per share. But going by the new structure, the value has been trimmed to Rs 300 per share. So the fall was more of a realignment to its fair value of Rs 2,250.

State-run power generation major NTPC was the top gainer, up 3.95% to Rs 161.80 on 17.56 lakh shares. It is planning a foray into wind power with an investment of over Rs 12,000 crore, reports said. The company will have wind energy projects with a total capacity of 200-250 MW. Besides this, the state-run company is working on hydroelectric projects and a few biomass plants. It is also said to be working with Asian Development Bank, and is planning to rope in a private partner for the new venture.

FMCG major Hindustan UniLever (HUL) advanced 1.39% to Rs 201.20 on 5.44 lakh shares. Mumbai-based Temptation Foods (TFL), a frozen food marketer, is understood to be inking a deal with HUL to acquire its marine product business division for around Rs 100-120 crore. The deal would also include transfer of the people managing the marine business in HUL to TFL.

HUL’s marine division exports products like crabsticks, shrimps and fish fillets among others. The company had earlier short-listed four bidders for the sale

After staying weak for the past few weeks, IT pivotals bounced back and outperformed the market as the rupee traded in a tight range, just off a nine-year high, on Thursday, 24 May 2007, reined in by dealers wary of provoking the RBI after it was suspected of intervening to block the currency's gains this week.

At 9:45 a.m, the partially convertible rupee was at 40.56/57 per dollar, largely steady with Wednesday's (23 May 2007) closing 40.550/565 and just off Monday's (21 May 2007) peak of 40.50 -- its highest since May 1998. The market is expecting $4 billion to $5 billion of foreign money to flow into Indian IPOs and equities by the end of June, which should add to the rupee's strength.

The RBI bought $2.3 billion in March 2007 in a bid to stem the rupee's rise. While intervention seemed have to have been less aggressive since mid-March, the central bank has been active this week, specially as the rupee approached 40.50.

The rupee was also came under pressure after oil rose above $70 today on worries over Iran's nuclear dispute with the West and thin gasoline stockpiles in the United States ahead of peak summer demand.

The BSE IT Index gained 0.3% to 5,067.73. Infosys (up 0.56% to Rs 1937), Satyam Computers (up 0.82% to Rs 455.95) advanced.

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.

Debutante Hilton Metal Forging settled at a slight discount at Rs 67.60 on huge volumes of 1.32 crore share. It debuted at Rs 75 per share on the BSE today, 24 May 2007, up 7.14% from the IPO price of Rs 70. It hit a high of Rs 80 and Rs 66, respectively. The company specialises in the manufacture of forgings for the oil, petrochemical, pharmaceutical and automobile industries.

Reliance Capital topped the turnover charts with a turnover of Rs 247 crore followed by Reliance (Rs 147.60 crore), Advanta (Rs 133 crore), ICRA (Rs 127.80 crore) and Divi's Lab (Rs 110 crore).

While Reliance Natural Resources (RNRL) led the volumes chart with total volumes of 1.55 crore shares followed by debutante Hilton Metal Forgings (1.32 lakh shares), IFCI (59.50 lakh shares), Idea (57.25 lakh shares) and Nagarjuna Fertlisers (54.70 lakh shares).

Meanwhile as per reports, the India-born billionaire Lakshmi N Mittal's Rs 3,365 crore investment for taking 49% stake in Hindustan Petroleum Corp Ltd's Bhatinda refinery in Punjab will have to wait a little longer for government approval as the Cabinet did not take up the issue on Thursday, 24 May 2007. The Cabinet Committee on Economic Affairs (CCEA) was to take up the issue of raising foreign direct investment (FDI) cap in public sector refineries to 49% from current 26% to facilitate Mittal to pick up stake in the Rs 17,973 crore project. As a result of this the HPCL shares plunged 4.81% to Rs 285.

As per the current policy, in case of private Indian companies 100% FDI is permitted under the automatic route, but in case of public sector units, FDI in petroleum refineries is permitted up to 26%. The current policy also restricts PSU holding to 26% in such projects and makes it mandatory for the balance 48% to be offered to public.

Divi's Laboratories vaulted 17.68% to Rs 4,780 on 2.41 lakh shares, following its surprise announcement of a stock-split of equity shares from Rs 10 each to Rs 2 each, after market hours yesterday, 23 May 2007. The company's net profit jumped 341.2% to Rs 100.98 crore in Q4 March 2007 as compared to Rs 22.89 crore in Q4 March 2006. Sales surged a massive 98.7% to Rs 252.59 crore (Rs 127.09 crore). Net profit spurted 172.1% to Rs 191.74 crore in the year ending March 2007 compared to Rs 70.47 crore in FY 2006. Sales increased 90.1% to Rs 724.42 crore (Rs 381.11 crore).

NIIT Technologies spurted 6.84% to Rs 554.75 after reporting a net profit surge of 64% in the March 2007 quarter and recommending a 1:2 bonus issue after market hours on 23 May 2007. The NIIT Technologies counter clocked a huge volume of 4,47,582 shares on BSE.

NIIT Technologies' net profit rose 64.01% to Rs 36.77 crore in the quarter ended March 2007 as against Rs 22.42 crore in the quarter ended March 2006. Sales jumped 36.74% to Rs 88.13 crore (Rs 64.45 crore).

Sterlite group zinc producer Hindustan Zinc rose 0.25% to Rs 668 after it raised lead prices by 2.1%, or Rs 2,000 to Rs 96,600 ($2,379) per tonne, effective immediately. The company, however, kept zinc prices unchanged at Rs 177,900 a tonne.

Man Industries saw high volatility today. It settled 0.20% to Rs 217.65 on high volumes of 18.88 lakh shares. A a single block deal of 18 lakh shares (6.83%) at Rs 219.40 per share was executed on BSE. The stock had surged to a high of Rs 239.90 in intra-day trade.

Matrix Laboratories galloped 11.02% to Rs 244.80 after the company reported a 77.08% rise in net profit in March quarter, reversing the decline in its profits in the previous two quarters. The company’s net profit rose to Rs 54.38 crore in the quarter ended March 2007 as against Rs 30.71 crore in March 2006. Sales increased to Rs 238.79 crore (Rs 167.71 crore). Net profit declined to Rs 99.61 crore in the year ended March 2007 as against Rs 182.38 crore in March 2006. Sales notched Rs 749.51 crore (Rs 667.14 crore).

Alembic rose 0.46% to Rs 65.40 on reports of possible acquisition of a domestic ophthalmic products maker. The company is now believed to be in talks to take over a domestic ophthalmic company as part of it inorganic growth strategy. Without disclosing the name of the target, Alembic said its deal size for the acquisition would be around Rs 100 crore.

Also, Alembic signed a deal to out-license its novel drug delivery platform to Belgium's UCB for the latter's anti-epileptic drug Keppra XR, on 23 May 2007. Under the deal, Alembic would receive milestone payments of $11 million over three years and would get additional royalty payments on sale of the drug.

Keppra XR is a once-daily, extended release form of UCB's twice-a-day Keppra, whose patent is set to expire in 2009. Keppra, which is chemically levetiracetam, clocked sales of 761 million euros in 2006. Alembic's objective is to file 20 abbreviated new drug applications (ANDAs) every year with the US regulator to sell its drugs in that country. Alembic has already filed three ANDAs so far.

K Sera Sera Productions gained 4.78% to Rs 18.65 after it scheduled a board meet on 30 May 2007 to consider raising up to $50 million for expansion.

Parsvnath Developers declined 1.79% to Rs 312.50 after NSE barred further positions in the F&O segment after market hours yesterday, 23 May 2007, as the marketwide position limit of the underlying had reached 95%.

Sterlite Optical Technologies moved up 1.55% to Rs 210 after it bagged a Rs 169-crore contract from MTNL for deployment of a broadband and metro ethernet network in Delhi and Mumbai. The network, once completed, would be capable of handling about half a million broadband connections in these cities. The project would be completed in FY 2008 and FY 2009.

An important set of data marketmen would be keenly awaiting tomorrow(25 May 2007) is that of inflation. India's wholesale price inflation rate is forecast at 5.24% for the 12 months to 12 May 2007, the lowest since early September 2006l. The data will be released around noon. Annual inflation in the previous week was 5.44%.

The annual rate had hit 6.69% on 27 January 2007, its highest in more than two years, but has since moderated as the central bank tightened policy and the government cut duties on a range of items to rein in prices.

Technically, the Sensex has strong support at 14,000 level and on the upside faces a stiff resistance at 14,600 level. Similarly, the Nifty has support of 4,180 on the downside, while on the upside there is a near term resistance at 4,300.

The annual monsoon is predicted to strike the Kerala coast Sunday, 27 May 2007, four days ahead of its normally scheduled date of arrival on 1 June 2007. From Kerala the monsoon travels upwards to the parched central Indian plans and is expected to bring rains to New Delhi by the end of June.

US indices slipped on Wednesday, 23 May 2007,giving back earlier gains as investors showed some caution after the Dow industrials and S&P 500 index briefly touched record territory. While the Dow Jones shed 14 points at 13,526, the Nasdaq Composite was down 11 points to close at 2,577.

Oil prices inched higher after a U.S. government report showed gasoline stocks rose unexpectedly, but still not enough to dispel supply fears at the kick-off of the summer driving season.

Light, sweet crude for July delivery rose 26 cents to settle at $65.77 a barrel on the New York Mercantile Exchange. Brent crude for July delivery climbed $1.08 to settle at $70.60 a barrel on the ICE Futures exchange in London, while gasoline futures slid 0.41 cent to $2.3104 a gallon.

Gold inched up in thin trade on Thursday, while Tokyo futures hardly moved ahead of the release of US data, which should offer new leads to the dollar and precious metals. Spot gold edged up to $661.70/662.20 an ounce from $660.60/662.10 late in New York on Wednesday.

The key April 2008 gold futures contract on the Tokyo Commodity Exchange was unchanged at 2,611 yen a gram despite gains in New York's Comex market. Silver inched up to $13.05/13.08 an ounce from $12.99/13.03 an ounce on Wednesday.