Sensex snaps five days of rally

The Sensex was going great guns in the past five trading session today took a breather, as bulls started liquidating positions in last hour of trade, on the Sensex's inability to hit new all-time high. Prior to today’s session, the benchmark index rallied sharp 525 points or 3.75% from 13,929.33 on 15 May to 14,453.72 on 22 May 2007.

The all-time high level for the benchmark Sensex was 14,723.88, hit on 9 February 2007. Marketmen expect the Sensex to consolidate before making any big upmove. Except for selective buying interest seen in metal and capital good sector, shares from auto, FMCG, oil & gas and banking space declined on profit taking.

The BSE 30-share Sensex declined 90.46 points or 0.63% at 143,63.26. It opened higher at 14,490.03, tracking flat global markets, and advanced to an intra-day high of 14,500.64. It slipped to a fresh intra-day low at 14,325.89, in late afternoon session of trade, as selling intensified. The market exhibited high degree of volatility today, 23 May 2007.

The S&P CNX Nifty lost 31.90 points or 0.75% at 4,246.2.

Robust set of FIIs and mutual fund inflows have been driving the markets higher in the past few sessions. FIIs have been on a buying spree as they purchased $747 million in equities in the last four sessions from 17 May to 22 May 2007. They bought shares worth a net $113.3 million on 21 May 2007.

Domestic institutions also provided support to the markets as they pumped Rs 1,145 crore in the Indian equity market in the last four sessions from 17 May to 22 May 2007. They bought shares worth Rs 314.4 crore on 21 May 2007.

All the European market were trading with gains while majority of Asian markets advanced. The Hang Seng index was down 0.22%, while the Nikkei 225 index rose 0.14%.

The market breadth, which indicates the overall health of the market, weakened further after staying in positive in the opening session. On BSE, 1,640 shares declined as compared to 950 that advanced. 83 scrips remained unchanged. This was in sharp contrast to the strong market breadth on BSE at 10:30 IST, when 1,001 shares advanced as compared to 678 that declined.

The BSE Small-Cap index settled 49.22 points or 0.68% lower at 7,237.55, while the BSE Mid-Cap index slipped 36 points or 0.59% to 6,108.84.

The total turnover on BSE amounted to Rs 5,293.97 crore, while the NSE F&O turnover was Rs 33,963.21 crore. Total market wide turnover declined to Rs 49955.04 crore as compared to Rs 50,069.21 crore on 22 May 2007.

Among the Sensex pack, 17 declined while the rest advanced.

Housing finance major HDFC was up 0.32% to Rs 1800.25 on high total volumes of 10 lakh shares. Two block deals were executed in the counter on BSE. One block deal of seven lakh share was struck at Rs 1,818 per share, while the other of one lakh shares was executed at Rs 1,785 per share. The counter hit an all-time high of Rs 1852.80 in intra-day trade. It was the third most top traded counter on BSE, with a total turnover of Rs 181.75 crore.

The share has been advancing in the past few days on hopes of higher valuations for its insurance and mutual funds business following media reports of high valuations for rival ICICI Bank's insurance operations.

Telecom shares eased after slashed roaming tariffs for outgoing calls by upto 70% to Rs 0.40 per minute on select plans. A cut in prices will impact these companies profitability.

Reliance Communications (RCom) was down 2.86% to Rs 508.40, and was the top loser. Bharti Airtel was also down 1.13% to Rs 849.45 on reports that it would also announce price cuts within the next couple of days.

PSU engineering major Bhel gained 1.57% to Rs 2718. The stock is rallying ahead of its record date of 1 June 2007 for the proposed 1:1 bonus issue. The company has earmarked about Rs 3,200 crore for investment in the Eleventh Five-Year Plan period to increase manufacturing capacity from the current 6,000 Mega Watt (MW) to 15,000 MW per annum.

Tata Steel surged 5% to Rs 658.80 on high volumes of 25.85 lakh shares in anticipation of firm prices. It was the top gainer. The private sector steel major has reportedly received permission from Vietnam's government to work with Vietnam Steel Corp on a $3.5 billion steel complex in the southeast Asian country.

Led by Tata Steel, the BSE Metal Index gained 0.99% to settle at 10,634.95. Maharashtra Seamless (up 0.34% to Rs 574) and Welspun Gujarat Stahl Rhoren (up 2.15% to Rs 161.75) were the other gainers.

The BSE Bankex lost 0.91% at 7,589.51. SBI (down 1.51%), HDFC Bank (down 0.39%), ICICI Bank (down 1.65%), Kotak Mahindra (down 2.81%), Federal Bank (down 3.27%), Bank of Baroda (down 3.07%) and Andhra Bank (down 2.33%), edged lower.

Bajaj Auto slumped for the fifth straight day as selling pressure continued. It lost 0.82% to Rs 2177, after staying firm throughout the day. 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 unveiled 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.

RIL was down 0.97% to Rs 1758 on 6.18 lakh shares. It struck a fresh all-time high of Rs 1785 in opening trade. The stock hit a lifetime high of Rs 1,780 in late trades on Tuesday, 22 May 2007, as buying momentum intensifed. However, it was not able to surpass it as some selling emerged at higher levels. The counter had reached the same all-time high of Rs 1,780 on 21 May 2007 as well.

There are reports that RIL is in talks with rig manufacturers for the purchase of a deepwater rig whereby it can carry out operations at a depth of around 12,000 feet. This may not prove to be an easy deal for the company given the fact that demand is far in excess of supply in the current market dynamics in the rigs business. Estimated to cost close to $1 billion, the company is working aggressively to corner rigs across the world, either by leasing them or by simply buying.

RIL has been hitting record highs in the past three sessions and has advanced over 34% to Rs 1,761.55 since its close of Rs 1,313.50 on 2 April 2007. The RIL stock entered a sharp uptrend after it said on Tuesday, 15 May 2007, it had made two gas discoveries in separate blocks off the east and west coasts of the country. The commerciality of the above discoveries is currently under evaluation.

FMCG stocks declined on renewed selling pressure. The BSE FMCG Index slipped 1.19% at 1,897.41, and was the top loser among the sectoral indices on BSE. United Spirits (down 5.60%), ITC (down 2.75%), Colgate (down 2.56%) and Marico (down 2.04%), closed in red. However HLL surged 2.29% to Rs 198.65 on value buying.

Shares from the capital goods space attracted renewed buying buoyed by consistent order win and bulging order book position. The BSE Capital goods index firmed up 0.6% and was the top gainer among the sectoral indices on BSE.

SKF Bearings India jumped 11.58% to Rs 480 on 5.71 lakh shares. Thermax (up 1.90%), Areva T&D (up 5.48%), Praj Industries (up 0.80%) and ABB (up 0.86%), advanced from the capital goods space.

Reliance Capital was the top-traded scrip in the A group, notching a turnover of Rs 205.18 crore on BSE. HDFC (Rs 181.94 crore), Tata Steel (Rs 168.08 crore), Unitech (Rs 125.91 crore) were the other turnover toppers.

Torrent Power rose 1.06% to Rs 76.50 after signing an agreement with Gujarat Power Corporation for setting up a 1,000+ MW coal-based power project at Pipavav in Amreli district, Gujarat.

Bata India surged 5.31% to Rs 179.20 on reports that the footwear firm was in talks with Reliance Retail for footwear retailing. Reliance Retail, as part of its retail strategy, plans to foray into footwear retailing and is planning to sign an agreement with Bata India.

Bata would sell footwear brands planned by Reliance Retail and, in return, Bata products would find space in Reliance Retail’s shelves.

NDTV dwindled 5.13% to Rs 406 after reporting a net loss of Rs 0.17 crore in the quarter ended March 2007 as against a net loss of Rs 1.97 crore in the March 2006 quarter. Sales rose 28.18% to Rs 67.37 crore, from Rs 52.56 crore. There was a net loss of Rs 6.89 crore in the year ending March 2007 as against a net loss of Rs 6.25 crore in FY 2006. Sales jumped 23.05% to Rs 235.38 crore, from Rs 191.29 crore.

Tata Tea slipped 0.63% to Rs 872, after striking a high of Rs 917. The stick surged following Coca-Cola's renewed interest in US-based energy drink maker Glaceau, in which the Indian company claims a 30% stake. On 21 May 2007, Beverage Digest, a trade journal, reported that Coca-Cola has filed a notification with the Federal Trade Commission of the US about its proposed acquisition of New York-based energy drink maker, Glaceau, that claims to have a 30% holding by the Tata group. The Beverage Digest reported that Coca-Cola's valuation of the deal could be around $4 billion.

Nine months ago, Tata Tea had bought 30% stake in Glaceau for $677 million, which worked out to an enterprise value of $2.2 billion for the company.

Rajesh Exports shares ended 0.17% lower to Rs 472, sharply from its day’s high reached after bagging a Rs 286-crore order from Excel Goldsmiths. The order is scheduled to be completed by 30 September 2007. The Rajesh Exports stock surged a massive 28% in just eight trading sessions, from Rs 375.80 on 9 May 2007 to Rs 481.10 on 21 May 2007, on momentum buying after the stock was introduced in the Futures & Options (F&O) segment of the National Stock Exchange (NSE) from 14 May 2007. It settled at Rs 472.40 on 22 May 2007, on profit booking after a sharp rally.

Wall Street ended an erratic session little changed yesterday as investors upbeat about the latest round of takeover activity remained hesitant to take the market higher ahead of new economic data. While stocks moved sideways, Treasury yields rose to a three-month high.

The Dow Jones industrial Average (DJIA) fell 2.93 points, or 0.02%, to 13,539.95.

Broader stock indexes were mixed. The Standard & Poor's 500 slipped 0.98 points, or 0.06%, to 1,524.12. The index, considered by market professionals as the best indicator of stock performance, passed its record close of 1,527.46 on Monday and again on Tuesday for the first time since 2000. However, the S&P remains well below its trading high of 1,552.87, reached in March 2000.

The Nasdaq Composite index, which has lagged the other major indexes in recovering from Wall Street's prolonged slump early in the decade, rose 9.23 points, or 0.36%, to 2,588.02.

Crude oil prices dropped below $65 a barrel as investors sold contracts before their expiration yesterday, and before the US government's weekly inventory report. The June contract for light, sweet crude, which expired yesterday, 22 May 2007, lost $1.30 to settle at $64.97 a barrel on the New York Mercantile Exchange. The July contract also fell $1.36 cents to close at $65.51 a barrel.

July Brent crude slipped 97 cents to $69.52 a barrel on the ICE Futures exchange.