Sensex ends with 141-point spurt, Suzlon Energy soars

The market saw a complete trend reversal, and settled with gains from initial weakness. A sharp short covering drive led the Sensex above the 13,500 mark, in the fag end of the day. Shares from IT sector led the rally today.

The 30-shares BSE Sensex jumped 140.61 points to 14,358.72, as per provisional closing. It had opened weak today, 25 May 2007, at 14,073 and plunged to a low of 14,046.06, on intense selling pressure for the third straight day as key pivotals declined. But from here is started advancing till it struck an intra-day high of 14,364.95.

Interestingly, all the European market and majority of Asian markets were trading weak. The Hang Seng index lost 1.34%, while the Nikkei 225 index was down 1.22%.

Suzlon Energy galloped a huge 17.76% to Rs 1364.70 on high volumes of 17.55 lakh shares on BSE. It surged to a high of Rs 1420, on momentum buying after the world’s sixth largest wind turbine generator finally secured German REpower as French major Areva opted out of the race. Interestingly, the REpower stock tumbled 10% in last trade and closed at 150 euros. Suzlon's last bid for REpower was also at 150 euros per share, valuing it at 1.5 billion euro.

As per Tulsi Tanti, Suzlon's chairman, his company as of now effectively holds 62% stake in REpower through its partnership with Portugal's Martifer and the agreement with Areva.

Suzlon on its own holds 7.8% in REpower. The company expects to get an additional stake of up to 15% by the end of today offer period expires. Tanti also informed that as per the agreement with Areva, the latter has agreed to sell its 30% in REpower to Suzlon anytime after one year, while Martifer has agreed to sell its 23% in REpower Suzlon after two years.

As per Tanti the acquisition will be EPS accretive from FY 2008, and will make Suzlon the fourth largest wind turbine maker in the world with an integrated power generation capacity of 3400 megawatt, which includes REpower capacity.

Suzlon will invest 150 million euro in its technology centre at Hamburg and the innovation centre in Denmark.

The wind turbine maker sees Europe as the best bet for future growth as it offers the highest margins. Suzlon expects 80% of its revenue from outside India in the next three-four years.

REpower is one of Germany’s biggest wind-turbine makers and one of the world’s leading companies in wind energy sector. It was the top traded counter on BSE with total turnover of Rs 230.34 crore.

The total turnover on BSE amounted to Rs 5,022 crore, which surged from Rs 3,857 crore by 14:30 IST

The market breadth, which indicates the overall health of the market, saw a sharp trend reversal. It was weak with 970 shares declining as compared to 596 advancing at 10:30 IST. But it turned positive in the post-lunch session as buying emerged for small- and mid-cap stocks: on BSE 1,426 shares advanced as compared to 1,169 that declined, while 83 remained unchanged.

Among the Sensex pack, 22 advanced, while the 8 declined.

IT stocks were back in demand as the rupee dipped further against the dollar and was quoted marginally lower in late morning trading following continued weakness in equity market.

In quite trade at the Interbank Foreign Exchange (forex) market, local currency resumed lower at 40.61/62 per dollar from overnight close of 40.59/60 a dollar and later traded arround 40.6150 level in late morning deals.

Meanwhile, traders feel the Reserve Bank of India's (RBI) move to hike the cash reserve ratio (CRR), more likely only on incremental deposits, is expected to provide some stability in the forex market.

Satyam Computers jumped 3.53% to Rs 472.10, and was the top gainer. Wipro (up 2% to Rs 542.50), Infosys (up 2.92% to Rs 1991) and TCS (up 0.66% to Rs 1232) were the other gainers.

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.

Second-rung software scrips also joined the rally. MphasiS (up 1.68% to Rs 308.55), i-flex (up 1.33% to Rs 2220), NIIT Technologies (up 11.59% to Rs 613) and CMC (up 4.78% to Rs 1235) gained.

Index heavyweight Reliance Industries (RIL) rose 0.38% to Rs 1732 on 8.54 lakh shares. It surged from a low of Rs 1701

HDFC (up 3.14% to Rs 1810), Reliance Communications (up 2.69% to Rs 507), and L&T (up 2.26% to Rs 1740), were the other gainers.

Cigarette major ITC rose 0.57% to Rs 167.10 after its net profit increased 14.6% to Rs 650.69 crore in Q4 March 2007 as against Rs 567.89 crore in Q4 March 2006. Sales were up 24.85% to Rs 3,568.62 crore (Rs 2859.08 crore). Net profit advanced 20.8% to Rs 2,699.97 crore in the year ending March 2007 as against Rs 2235.35 crore in FY 2006. Sales surged 26.1% to Rs 12705.79 crore (Rs 10,076.61 crore ).

On consolidated basis, net profit rose 20% to Rs 2,755.26 crore in FY 2007 as compared to Rs 2,295.38 crore in FY 2006. Consolidated sales edged higher by 24.4% to Rs 13234.49 crore (Rs 10,637.99 crore).

Bajaj Auto declined for the seventh consecutive session since it declared a scheme of demerger along with its poor set of results during trading hours on 17 May 2007. It however recovered from low of Rs 2141, was down marginally by 0.06% to Rs 2,170 on 1.82 lakh shares.

Disappointment about the post-demerger structure and lack of clarity about future business plans triggered a flurry of rating downgrades by brokerage houses.

It has eroded 20.60%, from Rs 2718.60 on 11 May till Rs 2171.40 on 24 May.

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.

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.

HDFC bank was the top loser, down 1.33% to Rs 1075.10 on 88,344 shares

Tata Steel slipped for the second straight day, down 1.06% to Rs 624.90, after the Reserve Bank of India (RBI) on 24 May 2007 stopped the purchase of the company’s 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. It had slumped 4.04% to Rs 632.25.

Crude for July delivery jumped as much as 35 cents, or 0.6%, to $64.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $64.38 at 10:30 a.m. in Singapore.

Brent for July delivery was at $70.67 a barrel on the London-based ICE Futures exchange, after rising 0.2% to $70.72 yesterday, its highest close since 28 August.

The market saw high volatility as inflation data was released by noon today. India's wholesale price index rose 5.27% in the 12 months to 12 May, lower than the previous week's increase of 5.44% due to a drop in textiles and food product prices, government data showed on Friday, 25 May 2007. The figure was marginally higher than the market's expectation of 5.24%.

Annual inflation for the week ended 17 March 2007 was revised to 6.56%, from 6.46%. The annual inflation rate was 4.63% in the corresponding week of the previous year. The wholesale price index stood at 211.7 points in the week ended 12 May 2007.

The market is seriously 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.

Real estate giant DLF has set a price band of Rs 500-550 per share for its initial public offer and lowered its mop-up target to a maximum of Rs 9,625 crore, against earlier estimates of up to Rs 13,600 crore. The issue will open on 11 June and close on 14 June 2007.

DLF would come out with a public issue of 17.5 crore equity shares of Rs 2 each through 100% book-building process. The post-issue dilution of the issue would be over 10%. This public issue would still be largest IPO as ONGC had raised Rs 10,500 crore through follow-on-offer, a company official said.

Also 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.

Wall Street retreated yesterday after housing data showed sales surged in April by the largest amount in 14 years and damped hopes that an interest rate cut would be needed to stimulate the economy.

The Dow Jones industrial average fell 84.52 points, or 0.62%, to 13,441.13. The shift in the direction of the Dow and the other major indexes Thursday was pronounced. The Dow rose nearly 100 points to 13,624.55 early in the session -- eclipsing its previous trading high of 13,609.75 reached Wednesday -- before pulling back.

Broader stock indices also declined. The Standard & Poor's 500 index lost 14.77 points, or 0.97%, to 1,507.51, and the Nasdaq composite index fell 39.13 points, or 1.52%, to 2,537.92.

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.