Cement and Reliance Drag India down

Elena
12 May, 2006
Mumbai

The real estate developer DLF was reported to have drafted a preliminary prospectus with SEBI amounting to $3 billion that was the reason for the market volatility in late session. Worries reign over the possibility that the super IPO might drain liquidity from the secondary market. The market was also influenced by weak global markets.

[R]10:30 AM Cement shares and heavyweight Reliance sink Indian Sensex.[/R]
Sensex in India was down 150 points, or 12% to close at 12,285. The benchmark swung 700 points in intra-day amidst high volatility. BSE recorded a turnover of $1 billion or Rs 4,429 crore, sharply down from Thursday’s $1.2 billion or Rs 5,044 crore. Political issues have also impacted the market, with concerns raised about left parties’ victory in assembly elections in Kerala and West Bengal.

Cement shares led the decliners, becoming prey to a sell-off after the government decision to consider measures, limiting the increase of cement prices. ACC dived 7.5% to Rs 893, Gujarat Ambuja Cements lost 6.6% to Rs 107, UltraTech Cement was down 3.7% to Rs 729 and Grasim shed 2.3% to Rs 2,250.

Reliance Industries was the other big player on the loser board, its stock down 3.5% to Rs 1,069.55, being intensively traded as 3 million (30.2 lakh) shares were exchanged. Its subsidiary, Reliance Petroleum, lost 1.5% to Rs 84.10.

Bank shares also lost, with ICICI Bank shedding 3.4% to Rs 637, State Bank of India losing 1.8% to Rs 958, and Bank of India diving 3.8% to Rs 146. Oriental Bank of Commerce joined in coming off 2.4% to Rs 246. ONGC shed 1.4% to Rs 1,436, as uncertainty about possible domestic oil peaks impacts refineries. Other losers included Indian Oil Corporation, falling off 2.3% to Rs 563.75 and HPCL down almost 1% to Rs 348.

Engineering companies and automotive stocks led the gainers, with L&T adding 2% to Rs 2,833 and Tata Motors edging 1% up to Rs 965 on strong quarterly expectations. Dishman Pharma soared 6% to Rs 243, following reports that the company is finalizing an acquisition deal in Switzerland. Mahindra Gesco Developer, also soared 15% to Rs 1,032.


[R]10:15AM March U.S. trade deficit declines to $62 billion.[/R]
March trade deficit came in at $62 billion lower than forecasted deficit of $67 billion. U.S. trade deficit declined on the account of lower imported oil price, higher exports of electric generators and farm products. Imported oil was priced at average price of $52.26 per barrel. Since then oil price has risen as high as $75 in the recent days.

Deficit with China, Canada, European Union nations, Japan and Mexico rose. U.S. registered trade deficit with most major trading partners. Deficit with China rose 12.5% to $15.5 billion and that with Canada declined on the account of lower U.S. dollar to $10.8 billion but with Mexico rose to $5.4 billion. Deficit with Japan rose 6.5% to $7.6 billion.

Import for the month fell to $176.6 billion, a decline of 0.8% on the account of 8.5% decline in imported petroleum volume. Annual trade deficit for the first three months of the year is running at a rate of $785 up 8.4% from a year ago.

[R]9:40AM Market trades lower at the opening.[/R]
Market opened with the averages in red. Dow opened 30 points lower, Nasdaq opened 13 points lower and S&P declined 4 points in the first five minutes of trading. Metals and mining stocks came under pressure. The Netherlands based Mittal Steel ((MT)) and Luxembourg based Arcelor reported weaker than expected earnings.

Southern Copper Peru ((PCU)), RTI International Metals ((RTI)), New Market Corporation ((NEU)) led decliners on the New York Exchange. On Nasdaq trading H E Equipment ((HEES)) and 51 Jobs ((JOBS)) led the gainers. Expedia ((EXPE)) fell 25% on lower earnings. After-the-close the company reported earnings of 6 cents vs. 14 cents a year ago.


[R]8:30AM Weak dollar and oil point weak opening.[/R]
Futures for this morning point more losses on the last trading day of this week. Market analysts have been looking for a correction in the broader averages in the U.S. market for the last two months that never arrived. With the elevated crude oil prices, weakening dollar and general interest rate concerns together took market averages down between 1% and 2% yesterday. This morning opening indicates that weakness will persist in the day’s trading. Dow futures point 30 points lower at the opening and 5 points lower in Nasdaq opening.

[R]7:00AM European shares down on falling dollar.[/R]
European shares logged initial losses to more than 1.5 % in morning trade, tailing off bank shares and worried by concerns over inflation and interest rates. Mining companies dropped on worries that the sector might be overheating. The high commodity prices added up to the fears over their possible impact on consumers and interest rates. By 09:50 GMT the U.K.’s FTSE 100 index lost 92.6 points to 5,949.4, having hit a trading session low of 5,936.8, its lowest since late March. Germany''s DAX 30 lost 1.6 % and France''s CAC 40 shed 1.7 %.

Crude oil pulled back on Friday after putting up more than $3 in the past three days on worries about gasoline supply in the U.S. U.S. light crude dropped 47 cents to $72.85 a barrel as the crisis with the hostages in Nigeria was settled successfully. London Brent crude shed 41 cents to $73.02 a barrel, after jumping more than $1 on Thursday. The dollar fell to a one-year low of $1.2907 per euro. It also reached a one-year low of 1.2040 Swiss francs and $1.8916 per British pound. The dollar bought 110.15 Japanese yen from 110.63 in New York.