Inflation up, Banks on Strike, Sensex Up 208

Elena
27 Oct, 2006
New York City

Strong quarterly earnings of mobile phone company Bharti Airtel together with news that a fire at Reliance Industries earlier this week has had minimal impact on production helped Indian shares rally on Friday. Buying was supported by the smooth rollover of open positions in the futures and options segment yesterday. The annual inflation rate in India has hit a four-month high. All-India bank strike was called by United Forum of Bank Unions.

[R]10:30AM The Sensex advances on large-cap gains and derivatives.[/R]
The Sensex on BSE finished 208.40 points, or 1.64% higher, at 12,906.81. The market-breadth was positive across the board. As 1,273 shares advanced, 1,206 declined, and 85 remained unchanged. From the Sensex stocks 25 advanced, while the rest declined. The turnover on BSE was Rs 3,934 crore, higher than Rs 3,408 crore on Thursday. The turnover on NSE was Rs 8,359.16 crore.

Economic news

The annual inflation rate in India has hit a four-month high, reaching nearer to the top of the Reserve Bank of India inflation target range and giving rise to speculation it will raise interest rates next week.

Nationwide strike was conducted by banking employees of public sector banks to protest the government guidelines of banking sector reforms. The reforms primarily guides banks to merge and consolidate and shrink the employee base with very little safety net for the laid-off employees.

Shapoorji Pallonji was granted an approval for Special Economic Zone for the IT industry to be located near Pune.

Advancers

Bharti Airtel led the advancers, up 5.03% to Rs 529.70. It had reached a new high of Rs 530. The stock was lifted by better-than-expected July-September quarter results, rising 79%. On a consolidated basis, the group reported a net income of Rs 933.82 crore for second-quarter, September 2006, compared to Rs 520.91 in second-quarter, September 2005. Bharti Airtel said low tariffs and rising middle class incomes allowed it to win four million new customers between July and September this year.

Index heavy Reliance Industries, flat till afternoon session of trade, started surging on high volume. The stock gained to Rs 1,227.10, an intraday high, as demand increased. The stock finished 4.35% higher, at Rs 1,226.35. Reliance Communications jumped 4.74% to Rs 385.50.

Credit Bank closed at a sharp premium of 82.7%, at Rs 47.50, over the IPO price of Rs 26. The stock was listed on BSE at Rs 35.35, and hit Rs 48.65 and a low of Rs 35.35. A strong block deal for 22.37 lakh shares was dealt in the United Breweries stock at Rs 168.50 per share. The stock finished 0.83% to Rs 169.45.

IT stocks advanced on fresh buying after a robust set of results from them. Tech Mahindra surged 10.16% to Rs 1,012, HCL Technologies rose 2.22% to Rs 630, Infosys jumped 1.48% to Rs 2,103, Polaris moved ahead 1.65% to Rs 135.55 and Satyam Computer egded up 0.60% to Rs 433.10.

GSK Consumer surged 7.43% to Rs 548, after its second-quarter, September 2006 net profit advanced to Rs 36.2 crore (Rs 30.3 crore). Net sales rose to Rs 301.5 crore (Rs 258.6 crore). Bank of India advanced 5.41% to Rs 164.55, following reports of 60% jump in net profit for second-quarte, September 2006 to Rs 212.13 crore (Rs 132.18 crore). Net interest income grew 46.7% to Rs 849.35 crore (Rs 578.63 crore).

Decliners

The major BSE losers were ONGC which declined 31.78% to Rs 787, TCS declined 0.28% to 1,077. Tata Steel shed 0.17% to Rs 500.50 and HDFC Bank fell 0.08% to Rs 995. Hindalco Industries shed 0.80% to Rs 187, as the company is reported to have raised aluminium prices by Rs 9,000 per tonne from 1 November 2006.

Suzlon Energy fell 5% to Rs 1,296, after it reported 13.3% growth in consolidated net profit for second-quarte, September 2006 to Rs 235.37 crore, against Rs 207.68 crore in second-quarter, September 2005. Sical Logistics plunged 10% to Rs 231.95 after the September quarter net profit fell 64%, compared with the same period last year. The company reported a net profit of Rs 6.12 crore, compared to Rs 17.13 crore a year ago.

Other news

Banking services were seriously hurt in Kerala on Friday as employees joined the all-India strike called by United Forum of Bank Unions in protest against the Centre banking policies. Reports from Kochi were that banking operations in the 5,000 nationalised and private banks in the state were affected as nearly 50,000 employees, including officers, participated. Business worth Rs 500 crore was affected following the strike.

Finance Minister P Chidambaram, who was in New York, stated that the Indian economy is set to grow over 9%, powered by both services and manufacturing. He also acknowledged, though, that there are persistent problems in the financial sector and capital markets.

Wipro Infotech said today it had signed an agreement to acquire the West Asia and SAARC operations of 3D Networks and Planet PSG in an all-cash deal.


[R]9:45AM Market opened in the negative after GDP data.[/R]
Stocks opened in the negative amid data, showing that the economy grew at the slowest pace in more than three years, due to cooling housing market. The Commerce Department said that GDP grew at a fell 10 cents to $34.26. The Dow was dragged lower by shares of General Motors ((GM)) as the auto maker was downgraded to sell from buy at Merrill Lynch, citing disappointment over Q3 operating results in North America and valuation. The decline for the blue-chip index was limited by good news from Chevron Corp. ((CVX)). The oil giant said its Q3 soared to $5 billion, hitting a new high in its 127-year history. The company posted 40% profit jump of $5.02 billion, or $2.29 per share, up from $3.59 billion, or $1.64 per share last year, beating analysts'' estimates.

The Dow was also supported by 1.1% gain for Microsoft ((MSFT)) on higher profit and revenue in the third quarter. Among other movers in early trading, Ingersoll-Rand ((IR)) fell 6.3% as the company''s Q3 profit fell due to disappointing results at its North American markets for compact equipment. In the first minutes of trading, the Dow Jones industrial average was down 39.30, or 0.32%, at 12,124.36. The Standard & Poor''s 500 index was down 4.69, or 0.34%, at 1,384.39, and the Nasdaq composite index fell 6.32, or 0.27%, at 2,372.78. The benchmark 10-year Treasury note last was up 13/32 at 101 19/32 with a yield of 4.670%, its weakest level in three weeks.


[R]9:30AM The FTSE 100 in London declines Friday morning on profit taking.[/R]
The FTSE 100 in London retreated 23 points, or 0.4%, to 6,162.0.

Advancers

Mining stocks climbed, led by Rio Tinto which traded 1.4% higher after it announced plans to increase its capital management programme.

Telecoms stocks were still in demand following recent upbeat results from France Telecom. Vodafone shares added 1.9% and BT Group rose 1.2%.

British Land gained 2.1% after it was reported that it was one of two candidates shortlisted for the redevelopment of Euston station, the other being a consortium of Morley Fund Management and Chelsfield Partners.

Shares in UK project manager John Laing surged 11% after it recommended to shareholders a £903m takeover bid from Allianz of Germany.

Decliners

Advertising and marketing company WPP Group fell 4.6% after third quarter revenues just missed forecasts.

Other media stocks trading lower in sympathy included Reuters, down 2%, and Pearson, which was also 2% lower.

Pharma stock AstraZeneca continued to move lower, down 3.1%, after it announced in the previous session that its stroke drug NXY-059 had failed in pivotal clinical trials.

Another pharma company GlaxoSmithKline lost 2.9% after disappointing drug development news on Thursday outweighed strong third quarter numbers. WestLB downgraded the stock from add to hold, while UBS cut its price target on GlaxoSmithKline.

Other news

Kazkommertsbank, the biggest bank by assets in Kazakhstan, announced plans on Thursday to raise around $800m on the London Stock Exchange early next month, racing ahead of two top Russian banks considering flotations for sometime next year.


[R]9:00AM Gross Domestic Product slowed to 1.6%.[/R]
The Commerce Department reported that Q3 U.S. economic growth slowed sharply, increasing at a real seasonally adjusted annual rate of 1.6% after a 2.6% increase in Q2. The growth rate came in below the 2.0% growth rate expected by economists.

Chevron Corp.''s ((CVX)) said its Q3 soared to $5 billion, hitting a new high in its 127-year history The company posted 40% profit jump of $5.02 billion, or $2.29 per share, up from $3.59 billion, or $1.64 per share last year, beating analysts'' estimates of $2.03 a share. Avon Products Inc. ((AVP)), a direct seller of cosmetics, reported a Q3 net income drop of 47% to 19 cents a share from 35 cents a year ago. The quarterly results were hurt by higher ad spending, restructuring costs, and a charge related to a tax dispute resolution in Britain. Revenue rose 9% to $2.06 billion from $1.89 billion last year, exceeding estimates. Wireless carrier Alltel ((AT)) posted Q3 profit jump of 11% to $1.04 from 98 cents a year ago, due to strong customer additions.

In merger-and-acquisition news, Mexican cement manufacturer Cemex SAB de CV said it is considering an offer of about $11.7 billion in cash for Australian heavy building materials maker Rinker Group Ltd. The Mexican company would also assume about $1.1 billion in Rinker debt. The deal would create one of the world''s biggest building materials companies with revenue of $23.2 billion and more than 67,000 employees in more than 50 countries. S&P 500 futures shed 2.10 points to 1,390.80 and Nasdaq 100 futures fell 3.00 points to 1,750.00. Futures for the Dow Jones Industrials Average dropped 19 points to 12,170.


[R]8:00AM Stock markets declined ahead of GDP data.[/R]
U.S. stock market futures pointed to a lower opening Friday, reflecting quarterly earnings from Microsoft and nervousness before GDP data, expected to show that the U.S. economy grew at a slower pace. On Thursday better-than-forecast profits released by Exxon Mobil Corp., Dow Chemical, Comcast Corp. and others boosted the sentiment, carrying the S&P 500 index to its highest close in about six years.

On Friday, investors were looking to the GDP figures, expected to show that during the third quarter the U.S. economy has grown at a 2% annualized rate, down from 2.6% growth in the second quarter, due to slowing housing market. On the corporate news front, Microsoft ((MSFT)) reported late Thursday an 11% rise in both profit and revenue in Q1 amid higher-than-expected sales of products including server software. But the company also warned that its results for its Q2 would be hurt by plans to defer about $1.5 billion in revenue to the following quarter. Sun Microsystems ((SUNW)), computer server and software maker, reported narrower quarterly loss as revenue rose 17%.

The IPO of the Chinese bank ICBC was in the centre of international news. Shares of the bank soared in both Shanghai and Hong Kong in its debut. Goldman Sachs ((GS)) has a 5% stake in ICBC, and underwriters on the IPO were Merrill Lynch, Deutsche Bank and Credit Suisse. Dow Jones futures were recently down 14 points, S&P 500 futures slipped 2.2 points and Nasdaq futures declined 2.2 points.


[R]7:30AM HK buoyed by largest IPO, Japan retreats on banks.[/R]
Asian markets ended mixed on Friday. In Tokyo, The Nikkei 225 Stock Average ended 0.9% lower at 16669.07. Banking company Mitsubishi UFJ shed 1% on concerns that weaker consumer price inflation means the Bank of Japan will be in no hurry to lift interest rates further. Japanese nationwide core consumer prices in September rose 0.25% on year, below analyst expectations of a 0.3% rise.

Advances by Honda, Nissan Motors and Sony cushioned broader losses. Shares of Honda rose 2.4%, while Nissan gained 2.2% on optimism new model releases and Sony rose 1.2%. Canon fell 2.4% after the group reported stronger quarterly profits but failed to upgrade its earnings outlook

The Hang Seng was up as much as 0.5% to 18446.46. In the largest IPO in the world, shares for ICBC soared in Hong Kong but disappointed investors in Shanghai. The largest lender of China saw its stock price rise 15%, but only 5.1% in Shanghai.

Elsewhere, Australia S&P/ASX 200 shed 0.6%. South Korea Composite Stock Price Index, or Kospi, dropped 0.4% while Malaysia KLSE Composite gained 0.5%. New Zealand benchmark NZX-50 index traded nearly flat. Taiwan Weighted Price Index rose 0.6% and Singapore Straits Times Index gained 0.1%.


[R]6:30AM European stocks marginally better Friday, as pharma stocks dip.[/R]
European markets were broadly flat by mid morning on Friday. the FTSE 100 eased slightly to 6,182.7, Frankfurt Xetra Dax was also marginally better at 6,286.34, while the CAC 40 in Paris fell 0.1% to 5,426.07.

Advancers

Telecoms led the advance on Thursday upbeat earnings from Telenor and France Telecom. Meanwhile, Telekom Austria was said to be considering buying a stake in Greek Hellenic Telecom, known as OTE, when the Greek government sells a stake early next year.Telekom Austria gained 2.9%, while OTE added 1%.

Telenor, which performed strongly yesterday, added a further 1.7%, while France Telecom gained 0.6%. Sector peers Deutsche Telekom and Spanish Telefonica gained 1.5% and 1.1% respectively.

Chip stocks were higher, wit Infineon up 1.1% and Franco-Italian group STMicroelectronics adding 1%. ASML, the Dutch maker of chip manufacturing equipment gained 1.5%. Nokia, the Finnish mobile phone group, gained 1.2% after announcing a network contract win in Ukraine.

Decliners

UK pharmaceuticals groups AstraZeneca and GlaxoSmithKline led the decline after downgrades from Credit Suisse. Astra shed 1.9%, while Glaxo fell 2.6%.

Oil and gold

Crude oil futures advanced on Friday, recovering to some extent from a sell-off by some traders who were locking in gains made when prices surged earlier this week. The front-month December light, sweet crude contract on the NYME was up 23 cents to $60.59 a barrel. Brent crude at London ICE Futures exchange rose 26 cents to $61.03 a barrel.

Gold opened Friday at a bid price of $594.00 a troy ounce, down from $594.30 late Thursday.

Currencies

The euro edged down against the U.S. dollar Friday after news that orders to U.S. factories surged last month by the greatest amount in more than six years. The euro bought $1.2678 in morning European trading, compared with $1.2693 in New York late Thursday. The British pound fell to $1.8882 from $1.8907. The dollar was also higher against the Japanese yen, rising to 118.49 yen from 118.39 yen.