Oil Dips, Sensex Rises

Elena
29 Aug, 2006
Mumbai

Sensex reached a new three-month high, supported by lower crude oil prices and positive global sentiment. In a late session, trading was subdued and stocks lost or gained little ground but closed well into the positive. Banking, energy, engineering, software and telecom stocks led the advancers today, while cement, petrochemical, power and steel stocks declined. Oil exploration large-cap ONGC gained 2.3%, while Reliance Industries slipped 0.5%.

[R]10:30AM The Sensex ended higher on lower oil prices and firm Asian stocks.[/R]
The Sensex on BSE advanced 87.33 points, or 0.75%, to close at 11,706.85, hittting an intra-day high of 11,739.77, its highest in three straight months. The turnover on BSE was Rs 2,653 crore, higher than Monday’s Rs 2,366 crore.

The market-breadth waned during the trading session. At close 1,240 shares advanced, 1,276 declined and 59 shares remained unchanged. Decliners outpaced advancers by a ratio of 1.02:1. In early trade, the market-breadth was strong as the advance-decline ratio reached 2:1. The Sensex on BSE traded in a narrow range of 11,690 and 11,739.

In trading today, Infosys gained 1.9%, to Rs 1,803, Wipro advanced 2.7%, to Rs 527, Satyam Computer added 0.8%, to Rs 818 and TCS edged up 0.7%, to Rs 990. Large-cap ONGC rose 2.3%, to Rs 1,225. Housing finance company HDFC gained 2% to Rs 1,290 on hopes of continued strong demand for home loans due to an ongoing housing boom. The stock surged in the second half of the trading session.

Other stocks which advanced included Reliance Communications adding 3.4% to Rs 310 on 17.8 lakh shares traded on BSE and car large-cap Maruti Udyog gaining 2.6% to Rs 856 on expectations that the government may not hike domestic fuel prices. Power equipment company BHEL advanced 1.8% to Rs 2,286 in the wake of the company statement on Tuesday that it will invest Rs 1,600 crore in modernisation and capacity expansion. ICICI Bank also added 1.4% to Rs 596 on optimism that interest rates may freeze in the near term.

Reliance Industries declined 0.5% to Rs 1,116. The stock experienced a weakness in the second half of trading after being higher and trading at Rs 1,125 - Rs 1,126 for a better part morning trade. Tata Steel also declined in the latter part of the day. The stock fell 2.2% to Rs 515.85, down from the session’s high of Rs 541. Hindustan Lever lost 2.2% to Rs 234.50. Tech Mahindra shed 2.7%, to Rs 537.50 on profit-taking, in the wake of strong performance on its first day of trading.

Cement stocks declined on Tuesday. Gujarat Ambuja shed 1%, India Cements was down 2% and Mangalam Cement sank 3%, all leading the decliners in the sector. UltraTech Cement ended the day higher by 2%. UltraTech which is part of the Aditya Birla Group, has proposed Rs 27-billion expansion plan over the next three years.

Select stocks, not part of the Sensex group soared. MRO-Tek, Goetze India, Manali Petro, GV Films, Hercules Hoists, Sterling Holiday Resorts, Gulshan Sugars, Rana Sugars, Batliboi, Indiabulls, Dalmia Cement, Surya Pharma, Praj Industries, Ambika Cotton, Era Construction, High Energy Batteries, Crest Animation Studios, and GMR Industries all gained between 5% and18%.


[R]9:45AM Stocks lacked direction at opening.[/R]
Stock markets lacked direction at opening with investors cautious ahead of FOMC meeting minutes and consumer confidence report. Oil prices continued to retreat, falling below $70 per barrel, contributing to some early strength in the airline sector. At the same time, the continued decrease by the price of oil led to significant weakness among energy stocks. Retailers, which posted solid gains Monday, extended their advance. Restoration Hardware Inc. ((RSTO)) surged 15% after the company said it swung to a quarterly profit and expects margin improvements. In the first hour of trading, the Dow Jones industrial average dipped 10.16, or 0.09%. The Standard & Poor''s 500 index fell 1.27, or 0.10%, and the Nasdaq composite index fell 1.01, or 0.05%.

[R]Consumer confidence sharply dropped.[/R]
Tuesday morning, the Conference Board released its report on consumer confidence in the month of August, showing that its consumer confidence index fell much more than economists had been expecting. The report showed that the consumer confidence index fell to 99.6 in August from an upwardly revised 107 in July. Economists had been expecting a more modest decline to a reading of 103 compared to the 106.5 originally reported for the previous month. The steep decline by the index reflected deterioration in both consumers'' assessment of current economic conditions and their outlook for the next six months. The Conference Board said that its present situation index fell to 123.4 in August from 134.2 in July, as those claiming conditions are good fell to 26.1 percent while those claiming conditions are bad rose to 16.7 percent. Consumers'' assessment of labor market conditions was also less favorable, as those saying jobs are plentiful fell to 24.4 percent while those claiming jobs are hard to get rose to 21.1 percent. As mentioned above, consumers'' outlook for the next six months also deteriorated, with the expectations index falling to 83.8 in August from 88.9 in July. The report showed that those anticipating business conditions to worsen rose to 12.9 percent while those expecting conditions to improve fell to 15.9 percent. The outlook for the labor market was also less favorable.


[R]9:00AM Stock futures indicated a flat to higher opening.[/R]
U.S. stock futures pointed to a slightly higher opening Tuesday, supported by expectations that the FOMC meeting minutes, due out later in the session, won’t reignite interest-rate jitters. The economic calendar Tuesday will also focus on the Conference Board''s August consumer confidence data.

Among companies releasing quarterly results, Bayer ((BAY)) reported Q2 earnings climbed 11% from the prior year, driven by sales growth from continuing operations. In addition, Bayer said it launched restructuring program that includes the closing of certain cites and elimination of 1,500 jobs, especially in North America. In corporate news, shares of Boeing Co. ((BA)) rose 0.7% before the opening bell after the jet maker''s board approved a plan to buy back up to $3 billion of its own shares. Coca-Cola Co. ((KO)) said it acquired a controlling holding in Kerry Beverages Ltd., a bottling joint venture it formed in 1993 with Kerry Group, a Hong Kong conglomerate.

BP PLC ((BP)) declined in London on news that federal regulators have begun criminal and civil investigations into whether it manipulated U.S. crude-oil and unleaded gasoline markets. Disclosure of the investigations comes as BP has been summoned before the House Energy and Commerce Committee to explain the recently discovered pipeline leak at its Prudhoe Bay, Alaska. S&P 500 futures were up 1.2 points, a touch above fair value. Dow Jones industrial average futures rose 15 points, and Nasdaq 100 futures gained 3.25 points.


Bayer, ((BAY)), German chemicals and pharmaceuticals company, reported a rise in Q2 adjusted profit, but said it would cut 1,500 jobs in the one division where sales declined, in CropScience. Earnings before interest and tax, including a week of Schering results and excluding the diagnostics unit it''s agreed to sell and also excluding special items, advanced 14% to 928 million euros ($1.18 billion), with sales up 6% to 7.07 billion euros. It said it would meet its 2006 targets when not including Schering results, with better results than expected at HealthCare and MaterialScience but CropScience sales now seen falling for the year.

Retalix Ltd, ((RTLX)), Israeli producer of enterprise-wide software solutions, reversed to a Q2 loss from a year-earlier profit on 4.8% revenue decline. The loss was 13 cents a share, compared with profit of 13 cents in the year-earlier period. The adjusted loss was 6 cents versus net of 16 cents. The company missed analyst estimate of 4 cents of profit. Retalix reiterated that revenue from projects that were not completed in Q2 will be posted for Q3 and Q4. And it affirmed its full-year estimates for revenue and adjusted profit.

Sanderson Farms Inc, ((SAFM)), chicken producer, reported Q3 earnings of 16 cents a share, down from a profit of $1.19 a share a year-ago. Sales rose to $281 million from $277 million in the same period a year earlier. The company said the latest results include an income tax benefit of 10 cents a share. The company also added that market prices for all poultry products were lower in Q3 than those experienced in the same period a year earlier. The company topped analysts’ estimate for a loss of 5 cents a share.

Kirkland''s Inc., ((KIRK)), home decor retailer, reported Q2 net loss narrowed to 29 cents a share, from a loss of 29 cents a share a year-ago. Q2 results of fiscal 2006 include a one-time charge of 2 cents a share. Net sales rose to about $91 million from $86.8 million. The company topped analysts’ expectations by a penny. Same-store sales fell 9% in Q2. For Q3, the company forecast a net loss of 18 cents to 22 cents a share. Net sales are expected to be $93 million to $96 million, with a same-store sales decrease of 6% to 9%.


[R]7:30AM Asian stocks ended higher on U.S. markets and weak oil prices.[/R]
Asian markets closed higher on Tuesday. The Nikkei 225 Average in Tokyo closed up 0.8% to 15,890.56. Nintendo, Sanyo, Suzuki Motor and Softbank advanced. Suzuki Motor advanced 3.5% after the Daiwa Institute of Research lifted its rating on the stock. Nintendo advanced 2.5%, while electronics-manufacturer Sanyo gained 2.6%.

Hong Kong''s Hang Seng Index also finished up about 1% to 17,083.28 as property companies were in focus, with Hang Lung Properties gaining 3.27%.In South Korea, the Kospi index advanced 1.26%, with leading exporter Samsung Electronics rising 2.64%. Australia''s S&P/ASX 200 advanced 0.86%. Beverage-maker Foster''s Group advanced 9.2% after a newspaper reported it may be targeted for a takeover. China''s Shanghai Composite advanced 0.04%.


[R]6:30AM European stocks advanced buoyed by pharma and tech stocks.[/R]
European markets traded higher by mid-morning. The FTSE 100 in London rose 0.5% to 5,909.5, the Frankfurt Xetra Dax advanced 0.2% to 5,864.49 and the CAC-40 in Paris added 0.1% at 5,169.49. Novartis rose 0.3% after Switzerland become the first European country to approve the company’s Lucentis drug as a treatment for a leading cause of blindness in people over 50. Bayer, the German drugs and chemicals group, topped expectations with second quarter core earnings up 14.1%.

The technology sector advanced on the back of news Elpida Memory of Japan predicted sales may double this year on demand for semiconductors in devices such as mobile phones and cameras. Infineon advanced 3%, STMicroelectronics gained 2.3% and ASML, which makes the equipment for making chips, gaining 2.2%. Earnings aside, Commerzbank slipped 1.3% after it said that it will take a 15.3% stake in Russia''s Promsvyazbank by participating in a capital increase at the bank.

Oil prices recovered Tuesday as the market shifted its focus on Iran and other supply issues on signs that tropical storm Ernesto would avoid Gulf of Mexico oil facilities. Light sweet crude oil for October delivery rose 18 cents to $70.79 a barrel on the NYME.

The U.S. dollar fell against other major currencies in European trading Tuesday morning. The euro was quoted at $1.2811, up from $1.2787 late Monday in New York. The British pound was quoted at $1.9008, up from $1.8952. The dollar bought 116.73 Japanese yen, down from 117.13. Gold dealers in London fixed a recommended price of $618.85 at midmorning, down from $623.90 late Monday in New York.