Sensex Slips, Small-Caps, Mid-Caps Shine

Elena
06 Oct, 2006
New York City

As profit-taking seized the blue-chips the focus was laid to small-caps and mid-caps today. The market-breadth was strong. IT, banking and auto stocks retreated. Refinery and construction shares edged higher. Some power stocks were also in demand. Hindalco, Reliance Communications and Gujarat Ambuja led the advancers. Hindustan Lever led the decliners. India is on course to attract a record $12 billion of foreign direct investment this fiscal year.

[R]10:30AM The Sensex edges lower Friday as profit-taking erases earlier gains[/R]
The Sensex on BSE shed 16.60 points, or 0.13%, to settle at 12,372.81. The market-breadth was positive as 1,580 shares advanced, 937 declined and 56 shares were unchanged. Advancers outpace decliners by 1.68:1. The market traded in a narrow range of 76.26 points, between 12,357.96 and 12,434.22. The turnover on BSE was Rs 3,686 crore, compared to Rs 3,681 crore in Thursday. The turnover on NSE was Rs 6,604.85 crore.

India seems to be able to attract a record $12 billion of foreign direct investment this fiscal, going by inflows in the first four months which have almost doubled from a year ago at $2.9 billion.

Most active

VSNL headed the value chart with a turnover of Rs 192 crore followed by Reliance (Rs 128 crore), Bombay Rayon (Rs 87 crore), Tata Steel (Rs 68 crore) and HPCL (Rs 66 crore).

Advancers

Hindalco led the gainers advancing 1.94% to Rs 175.90. Refinery shares soared on hopes of improved second-quarter results. HPCL jumped nearly 5%, to Rs 305.25. The stock gained on a heavy volume of 22.1 lakh shares as several block deals were traded in the stock on BSE. Indian Oil Corporation jumped 5% to Rs 565.90 and BPCL rose 4.6% to Rs 394.

Index heavyweight Reliance Industries showed volatility due to alternate rounds of buying and selling. The stock rose 0.4% to Rs 1,159.60. It moved between Rs 1,152.55 and Rs 1,174.

Infosys rose 0.3% to Rs 1,871.80. The stock had struck an early low of Rs 1,847.25. Gujarat Ambuja Cements (up 0.9% to Rs 121.85) moved higher for the second day in a row. Telecommunication service provider, VSNL, surged 9% to Rs 432. Volume in the stock was a huge 40.4 lakh shares on BSE. Reliance Communications advanced 1.3% to Rs 353, extending its recent gains.

Construction shares were in focus after the UPA government cleared upgradation of the entire Golden Quadrilateral highway stretch from four lanes to six lanes. IVRCL Infrastructures rose 6% to Rs 288.40, Hindustan Construction added 5% to Rs 128, GMR Infrastructure rose 2.2% to Rs 236, Valecha Engineering gained 10% to Rs 211.80, Gammon India rose 3.7% to Rs 404, and Patel Engineering rose 5% to Rs 349.45. Gujarat Ambuja Cements (up 0.9% to Rs 121.85) gained for the second day in a row. Earlier this week, it reported a surge in cement dispatches for September 2006.


Tyre shares advanced for the second day running. MRF jumped 5% to Rs 4,269.35, CEAT rose 5% to Rs 128.15, Goodyear India rose 4% to Rs 147, and Apollo Tyres rose 2.5% to Rs 352.90.

Truck and bus maker Ashok Leyland rose nearly 2% to Rs 48.80, after it announced that sales in September surged 39% from a year earlier, to 8,155. Petronet LNG ended flat at Rs 58. Volume in the stock was a huge 72 lakh shares on BSE.

Decliners

Apart from Infosys, all the other large-caps in the sector dipped. IT pivotals eased. Wipro lost 0.9% to Rs 516, Satyam Computer shed 1% to Rs 809 and TCS lost 0.3% to Rs 995.

Hindustan Lever lost nearly 2%, to Rs 245 and cigarette large-cap ITC shed 1.3%, to Rs 184.80. Petronet LNG finished flat at Rs 58. Volume in the stock was a huge 72 lakh shares on BSE. The stock had soared 20%, to Rs 57.90, on Thursday after the government offered Qatar up to 12.5% stake in the gas transmission company.

Other news

Cipla has announced the setting up of a wholly owned subsidiary, Cipla FZE at Jebel Ali Free Zone, Dubai, United Arab Emirates.

Tata Sky, an 80:20 joint venture between the Tata Group and Star India, has set sights on acquiring one million subscribers by August 2007.


[R]9:45AM Market opened below the flat line.[/R]
Stock averages started trading in the negative, following three straight sessions of record gains, with the Dow Jones Industrial closing at a highest-ever 11,866.69. The initial weakness was due to an employment report which gave another signal that the economy is slowing and inspired traders to cash in on the market''s recent gains. The Labor Department said that employers added far fewer jobs than analysts expected, but the good news was that the unemployment rate fell to 4.6%. Gold, airline, and brokerage stocks showed significant weakness in early trading. In corporate news, Micron Technology ((MU)) dropped 10% after the chipmaker issued a Q3 profit report that disappointed investors. In the first hour of trading, the Dow Jones industrial average was down 45.78, or 0.39%, at 11,820.91. The Standard & Poor''s 500 index was down 3.28, or 0.24%, at 1,349.94, and the Nasdaq composite index fell 10.49, or 0.45%, at 2,295.85.


[R]9:30AM London trades flat at mid-day, awaiting U.S. job data.[/R]
The FTSE 100 in London lost 13.00 points, or 0.22% at 5,991.50 at 2:00 pm GMT.

In focus

Manufacturing output grew for the fourth month in a row in August, pushing up the annual rate of increase from 1% in July to 1.5% and maintaining the steady growth of output in the sector.

Advancers

Severn Trent stood out with a gain of 2.44%, as M&A fever again descended upon the utilities sector after a recommended 1.62 bln stg bid for Viridian, which spurted 7.94%. PartyGaming remained the top advancers, however, bouncing back 6.17% from the plunge this week, as a smattering of hopeful press comment reassured investors that the end may not yet be nigh for the online gaming sector.

Specialty pharma group Shire was also in demand, rising almost 1% after the company said it expects to know today whether the US medicine regulator has granted marketing approval for its new drug to treat hyperactivity.

Decliners

On the downside, Vodafone down 1.19%, led the decline, hit by a Deutsche Bank downgrade to hold from buy. The broker cited worries over fundamentals and valuation grounds.

Corus also slid 3-1/4 pence lower as investors took profits following the share price jump yesterday on the back of Tata Steel confirmation that it is evaluating opportunities including a possible approach for the Anglo-Dutch firm.


[R]09:00AM Stock futures pointed to a weaker start on employment data.[/R]
U.S. stock market futures declined Friday after weaker-than-expected September employment data added too worries about an economic slowdown. The Labor Department said that U.S. nonfarm payrolls rose by an estimated 51,000 in September, the lowest rise in 11 months, and came in below the 123,000 rise expected by economists. The weakness in employment, which was mainly concentrated in the manufacturing and retail sectors, was offset by gains in health care and finance.

In corporate news, shares of Micron Technology Inc. ((MU)), chip maker, dropped 6% in electronic trading before the opening bell, as the company reported quarterly profit that missed analysts'' expectations. In deal news, wireless tower company Crown Castle International Corp. ((CCI)) agreed to acquire smaller rival Global Signal Inc. ((GSL)) for about $5.8 billion in cash, stock and debt. S&P 500 futures were down 3.1 points, below fair value. Dow Jones industrial average futures fell 21 points, and Nasdaq 100 futures dipped 3.25 points.


[R]Employment rate slowed in September.[/R]
Friday morning, the Department of Labor released its closely watched report on the employment situation in the month of September. The report showed that employment growth came in well below economist estimates. The Labor Department said that non-farm payrolls increased by 51,000 in September after an upwardly revised increase of 188,000 in August. Economists had expected payrolls to increase by about 120,000 compared to the increase of 128,000 originally reported for August. The relatively modest increase in employment reflected continued job growth in the health care and financial sectors. The growth was partly offset by a decline of about 19,000 jobs in the manufacturing sector. The report also showed that the unemployment rate unexpectedly edged down to 4.6 percent in September from 4.7 percent in August. The decrease came as a surprise to economists, who had expected the unemployment rate to remain unchanged. The Labor Department added that average hourly earnings edged up 0.2 percent in September to $16.84, matching the increase that was seen in the previous month. Average hourly earnings were up 4.0 percent on a year-over-year basis. While the weaker than expected employment growth may raise some concerns about the strength of the economy, it may also help to add to recent speculation that the Federal Reserve is likely to cut interest rates in the near future.


[R]8:00AM Crown Castle agreed to acquire Global Signal for $5.8 billion[/R]
Crown Castle International ((CCI)) agreed to acquire Global Signal Inc. ((GSL)) for $5.8 billion in stock and cash. Under the terms of deal, Crown Castle, owner and operator of wireless infrastructure, will assume estimated debt of $1.8 billion, and the total cash consideration will be capped at $550 million. According to the agreement, Global Signal stockholders are entitled to convert each of their shares into 1.61 Crown Castle shares or they can choose to receive the amount of $55.95 per Global Signal share in cash. The transaction, which brings together two tower companies with more than 24,000 wireless sites between them, will enable Crown Castle to expand its business footprint. Global Signal''s three largest stockholders agreed to vote shares representing about 40% of Global Signal''s outstanding shares in favor of the transaction.


[R]7:30AM Japanese stocks edged lower on Friday on profit-taking.[/R]
Asian markets closed mixed. The Nikkei 225 Average closed 0.08% lower at 16436.06. Tech names were lower after a three-week winning streak, as Canon fell 1.2%. Nippon Steel advanced 1.2% as news that Tata Steel was considering a $10 billion bid for Corus Group gave a boost to prospects of more consolidation in the steel sector and lifted steel shares higher. Inpex Holdings added 1.8%, despite worries it may lose part of its stake in Azadegan in Iran oil field. Large financial stocks were notable advancers, as Mizuho Financial Group gained 2% while Nomura Holdings rose 3.3%.

The Hang Seng Index in Hong Kong slipped 0.02% to close at 17903.39. New World Development, which gained 2.6%, was one of the biggest blue-chip advancers. China-related firms fell following big rises recently. China Mobile fell 1.2% after hitting an all-time closing high Wednesday.

Australia S&P/ASX 200 closed 0.03% higher at 5220.70. Minara Resources surged 5.8% after reporting record nickel production for the third quarter. Queensland Gas jumped 4% on hopes of counter offers to the bid launched Thursday by Santos.


[R]6:30AM Airline gains counter telecom sector weakness in Europe.[/R]
European markets were slightly higher by mid-morning on Friday. The FTSE 100 in London reached 6,006.6, Frankfurt Xetra Dax was up 0.1% at 6,083.12, and the CAC 40 in Paris was fractionally higher at 5,289.52.

M&A

Ryanair late on Thursday launched a surprise bid for Aer Lingus, valuing the company at 1.48 billion euros. The board of Aer Lingus rejected the offer saying it undervalued the long-term growth potential of the company.

Advancers

Shares in Ryanair added 1.5%, while Aer Lingus gained 1.7%. EasyJet''s shares rose 2.2% after lifting its profit forecast following a September passenger traffic rise of 9.8%.

European banks enjoyed another session of M&A rumour-driven gains as Banesto in Spain jumped 6.4% on talk of a bid from domestic rival Santander.

Decliners

Mobile and fixed-line telecom stocks were on the wane after Deutsche Bank made downgrades in each sector. Telecom Italia fell 1.1% after it was cut from buy to hold and had its target price lowered. Meanwhile, Vodafone, the UK mobile operator, fell 1.4% after Deutsche lowered its rating from buy to hold and its target price.

French aerospace group EADS is still struggling as it continued to emerge as Rolls Royce, supplier of engines for the ill-fated Airbus A380, said it had suspended work on the project for 12 months. Although Rolls said the suspension would not affect its financial guidance for the year, the shares fell 1.1%, while EADS slid 3.1%.

Oil and gold

U.S. crude oil fell 22 cents to $59.81 a barrel by mid-morning inEurope, after dipping to a low of $59.60 in early trade. London Brent fell 20 cents to $59.80. Gold opened Friday at a bid price of $570.50 a troy ounce, up from $568.55 late Thursday.

Currencies

The euro slipped against the U.S. dollar Friday ahead of new jobs data from the United States. The euro bought $1.2680 in morning European trading, slightly below its level of $1.2690 in New York late Thursday. The British pound dropped to $1.8744 from $1.8786. The dollar rose to 118.07 Japanese yen from 117.61 yen