Volatile Sensex Slips, Hindustan Earnings Surge

Elena
31 Oct, 2006
New York City

The Sensex witnessed a highly volatile session Tuesday with selling continuing throughout trading, making the benchmark index shed points. Although the turnover rose sharply, the market-breadth was weak, as selling hurt small-caps and mid-caps. State bank gained after RBI kept key interest rates unchanged in its credit policy announced today. The central bank raised slightly its overnight lending rate. Tata group and Reliance Communication led the decliners.

[R]10:30AM The Sensex sheds 62 points in volatile trading, turnover jumps.[/R]
The Sensex on BSE closed 62.36 points or 0.48% lower at 1,2961.90. The market-breadth was weak, there were almost 2 decliners for every advancer on BSE. For 1,643 shares that declined, 868 advanced and 59 remained unchanged. From the Sensex stocks, 18 declined while the rest advanced. The turnover on BSE was Rs 4,392 crore, much higher than Rs 3,708 crore on Monday. The turnover on BSE was Rs 8,764.82 crore.

Economic news

The Reserve Bank on Tuesday kept that key interest rates unchanged so as to maintain stable commercial lending rates, including that of home loans, to support the growth momentum. At the same time, Reserve Bank of India took a small step to contain inflation, now hovering at over 5%, by raising repo rate (overnight rate) at which Reserve Bank of India buys securities from banks to 7.25% from the earlier 7%.

Decliners

Reliance Communications led the decliners, down 3.70% to Rs 379 on heavy volumes of 22.43 lakh shares. It had soared to a high of Rs 400 in early trades.

Tata Motors shed 2.36% to Rs 832. Its ADR had plunged over 4% on Monday on NYSE. Tata Steel lost 1.39% to Rs 491.40 on 13.69 lakh shares. Its second-quarter, September net profit rose 5.4% to Rs 1,101 crore (Rs 1,045 crore). Net sales increased 7.8% to Rs 4,185.75 crore (Rs 3,884.42 crore).

Index heavy, Reliance Industries sank 0.47% to Rs 1,226.70 on 7.30 lakh shares. It had struck an intra-day high of Rs 1,240 in early trades, recovering from low of Rs 1,219.10. Reliance Industries has raised $300 million through a private placement of debt papers with US insurers, the company and Bank of America Securities announced today.

Ashok Leyland dipped 5.19% to Rs 43.80 despite its second-quarter, September 2006 net profit rose 27.1% to Rs 95.3 crore (Rs 75 crore). Ind-Swift Laboratories fell 6.50% to Rs 65.50 after reporting its net profit fell 46% for the July-Sept 2006 quarter from a year ago. Sterlite Optical Technologies lost 0.97% to Rs 193.50, after hitting a high of Rs 205. The company reported a surge in net profit for second-quarter, September 2006.

Advancers

Hindustan Lever led the advancers, jumping 3.02% to Rs 235.65 on 22.49 lakh shares in the wake of the company release of 60% rise in September quarterly earnings on strong demand for soaps, shampoos and packaged foods, as well as one-off gains from stake sales. Net profit surged to Rs 520.74 crore for the quarter ended 30 September 2006 where as the same was Rs 325.96 crore for the quarter ended 30 September 2005.

State banks rose on the decision of the Reserve Bank of India to maintain key rates. Indian Overseas Bank jumped 2.83% to Rs 117.90, Bank of India gained 4.50% to Rs 174, Andhra Bank edged up 1.25% to Rs 93.05, Bank of Baroda advanced 0.74% to Rs 279.90, and State Bank of India notched up 0.14% to Rs 1,096.25.

Satyam Computers gained 2.36% to Rs 440.40. It bounced back from its low of Rs 434.70. Hero Honda advanced 1.50% to Rs 757 after declining to a low of Rs 747. Aviation stocks surged helped by renewed buying. Deccan Aviation surged 10.89% to Rs 112, Spicejet jumped 10.27% to Rs 45.65 and Jet Airways gained 2.25% to Rs 596.

Cummins India soared 7.96% to Rs 270 after it reported 66% growth in net profit for second-quarter, September 2006 to Rs 62.69 crore (Rs 37.76 crore).

Other news

In an effort to move toward full float of rupee, the Reserve Bank of India announced today a number of measures such as doubling of resident individual remittances to 50,000 dollars per year, prepayment of ECBs up to 300 million dollars without prior approval, and the bank also eased norms for corporates to set up offices abroad by increasing the limit of remittances for the purpose.


[R]9:45AM Market opened higher, boosted by falling oil prices.[/R]
Stocks posted gains at opening, as Procter & Gamble Co. reported stronger-than-expected results and oil prices further declined amid easing political tensions. Light, sweet crude fell 56 cents to $57.80 a barrel in electronic trading. The price decrease contributed to significant strength in the oil-sensitive airline sector. While some strength also emerged among networking and biotechnology stocks, the health insurance sector further weakened after coming under pressure in the previous session.

Procter & Gamble ((PG)) was down 1.8% after the world''s largest consumer-products company said that Q1 income rose 33%, helped by strong sales and volume gains and the addition of Gillette. However, organic sales, a closely watched measure, rose a much smaller 6%. The Dow component raised its full-year earnings forecast to $2.97 to $3.02 a share, up from $2.96 to $3 a share. In other earnings news, Eastman Kodak Co. ((CO)) posted a loss of $37 million, or 13 cents a share in Q3, citing $202 million in restructuring costs. The stock rose 5.7%. Insurance giant MetLife ((MET)) fell 1.7%, despite reporting 34% profit increase in Q3, with earnings above estimates. The Dow Jones Industrial Average was up 11 points at 12,096. The Nasdaq Composite Index gained 7 points to 2,370 while the S&P 500 Index was up 1 point at 1,378.


[R]9;30AM The FTSE 100 in London is steady Tuesday afternoon on earnings.[/R]
The FTSE 100 in London is 0.26% higher at 6,143 in the afternoon on Tuesday.

Advancers

Friends Provident rose as much as 6%, leading advancers in the index after it topped forecasts with a 40% rise in third-quarter life insurance and pensions sales. The insurer said it aimed to triple the value of sales by 2008.

Insurer Aviva ticked up 0.4% after Deutsche Bank lifted its target price on the stock. Pharmaceuticals were in demand, with Shire bouncing from losses on Monday to gain 3.5%. Brokerages upgraded the drug maker and it announced the start of a new drug trial.

Miners were mixed, with Antofagasta adding 0.8% and Kazakhmys rising 0.5% on higher third-quarter production levels, but others lower as base metal prices broadly softened.

Housebuilder Persimmon announced trading continues to match company expectations, but warned the market remained competitive. Persimmon gained 0.53%.

Decliners

Tobacco was a declining sector, with Imperial Tobacco down 0.4% after saying it was seeking acquisitions but there was not much on the horizon as it posted an in-line rise in annual earnings.

British American Tobacco fell 0.7% but Gallaher Group bucked the downtrend, rising 2% as analysts saw it as the most likely takeover target in the sector.

Cairn Energy led the decliners in the FTSE 100, down 2% after a sharp drop in crude oil prices and as analysts continued to pick over the details of its Indian IPO. Cairn Energy and BG are both lower as US crude for delivery in December declined. BG is 1.42% lower.

Cadbury Schweppes lost 0.9% after brokerages lowered their target prices in the wake of cut in its annual profit goal on Monday, which it had admitted last week it would not meet for 2006.

Other news

The Financial Services Authority hopes it can shrink its workforce in the next few years as Britain financial watchdog attempts to shift to regulation based on broad principles rather than enforcing thousands of rules.

A group of 11 leading trade associations has launched a bold move to influence the interpretation of imminent European Union financial markets legislation amid fears UK regulators could take an overly-stringent approach.


[R]9:00AM Stock futures advanced on uplifted outlook by Procter & Gamble.[/R]
U.S. stock market futures traded higher Tuesday, reflecting uplifted earnings outlook by Procter & Gamble. Consumer products maker Procter & Gamble Co. ((PG)) reported higher-than-expected Q1 profit jump of 33% to 79 cents a share, up from 77 cents last year, boosted by 27% revenue increase due to sales from Gillette and improved margins. The company also lifted its full-year earnings outlook on a better commodity and energy cost forecast. MetLife ((MET)) is expected to trade actively after the insurer reported a 34% profit rise and said it would restart a share buyback program.

Eastman Kodak Co. ((EK)) posted a loss of $37 million, or 13 cents a share in Q3, citing $202 million in restructuring costs. This was the eighth quarterly loss in a row, but compared with a year-ago loss of $914 million, or $3.18 a share, when it took a $778 million tax, a significant improvement has been achieved. Sales fell 10% to $3.204 billion. Excluding one-time items, Kodak earned 44 cents a share, missing expectations of earnings of 19 cents a share on sales of $3.285 billion.

In merger-and-acquisition news, Merck ((MRK)) offered more than double the closing price for Sirna, maker of a drug to treat blindness. Elsewhere, Verizon Communications ((VZ)) was downgraded to neutral from buy at UBS on the roll-out of the company''s fiber network and lower core profitability. Celegne ((CELG)) rose over 4% in German trading after Standard & Poor''s said it would add the company to the S&P 500. S&P 500 futures rose 1.9 points at 1,385.10 and Nasdaq 100 futures rose 3.25 points at 1,740.00. Dow industrial futures rose 13 points.


[R]8:00AM Merck agreed to buy Sirna in a deal worth $1.1 billion.[/R]
Pharmaceutical company Merck & Co. ((MRK)) said Monday it agreed to buy Sirna Therapeutics Inc. in a deal worth $1.1 billion. Merck''s $13-per-share offer is almost a 102% premium over Sirna''s closing price of $6.45, which fell 5 cents before the bid was made public after the stock markets closed. Sirna''s stock surged 98% to $12.74 in after-hours trading. Merck''s shares fell 45 cents to $45.64 at the close of trading on the NYSE and remained unchanged in after-hours trading.

Sirna is a small biotechnology company developing drugs based on new technology, the so-called RNA interference technology, a technique discovered by this year''s Nobel winners, Andrew Fire of Stanford University and Craig Mello at the University of Massachusetts. There are eight U.S and European patents specifically related to the technology. Drug makers and researchers have long sought to create drugs that target bad cells while leaving healthy ones alone. Many people believe that RNA interference will be a powerful tool in customizing drugs.

The closest drug Sirna has near market is for the treatment of the eye disorder, macular degeneration, a leading cause of blindness in the elderly. However, that drug is still at least two years from regulatory approval. Merck said stockholders holding 36% of Sirna''s outstanding shares already have committed to support the deal. The transaction is expected to complete in Q1 of 2007.


[R]7:30AM South Korea leads Asia higher Tuesday, Japan advances on large-caps.[/R]
Asian markets finished mostly higher on Tuesday. The Nikkei 225 Index rose 0.3% to finish at 16399.39. Machinery stocks led the advance, with Fanuc gaining 6.2% and Toshiba Machine jumping 2.8%. Sony ended the session 0.2% higher. Shares of Softbank fell 2.9% after the Internet-services company is reportedly now under investigation by Japan antimonopoly body over possible advertising law violations.

In Seoul, South Korea market advanced, led higher by strong gains from Lotte Shopping and other retail stocks. The Korea Composite Stock Price Index, or Kospi, rose 0.6% to 1364.55. Lotte Shopping, operator of largest department-store chain in South Korea, rose 2% on news it will open a department store in Beijing in the first half of 2008 in a 50:50 joint venture with Yintai Group of China. Retailer Shinsegae surged 3.8% and Hyundai Department Store gained 2.5%.

Other markets in the region also advanced. Hang Seng Index in Hong Kong rose 0.2% to 18324.35, while Taiwan Weighted Price Index gained 0.4% to 7021.32 and New Zealand NZSX-50 rose 0.8% to 3784.49. Sydney S&P/ASX 200 bucked the trend and closed down 0.3% at 5384.40.


[R]6:30AM European shares advance on Tuesday on strong carmakers rally.[/R]
European markets were higher on Tuesday by mid morning. The FTSE 100 in London rose 0.3% to 6,145.9, Frankfurt Xetra Dax added 0.4% to 6,284.89, the CAC 40 in Paris climbed 0.1% to 5,368.77.

Advancers

DaimlerChrysler shares were up 3.4%, while Renault of France gained 2%, and Fiat of Italy added 1.4%. UBS shares fell 4.6%. Rival Swiss bank Credit Suisse shed 0.9%.

Insurers gained supported strong third-quarter revenues from Friends Provident of Britain, which gained 5.3%. European life groups ING and CNP Assurances advanced 1.1% and 1.1% respectively. Among the non-life groups, Generali jumped 1.3% and Munich Re moved up 1.1%.

Telenor, the Norwegian mobile operator, gained 1%. It reported better-than-expected numbers last week, prompting several broker upgrades.

Decliners

Sanofi-Aventis, the French drugmaker, fell 3.9% after reporting an 11.6% fall in third-quarter profit. Swedish paper products maker SCA fell 3.8% after reporting third-quarter pre-tax profits that fell shy of expectations.

KPN, the Dutch fixed-line telecoms group, declined after its 4.4% rise in third-quarter earnings fell just short of market forecasts, despite a strong performance at E-Plus, its German mobile division.

Dexia downgraded the group from “add to neutral, disappointed by dividend outlook and performance of KPN at its fixed-line business. The shares fell 1%.

Oil and gold

Oil prices edged higher Tuesday, recouping some of their losses after plunging more than $2 a barrel the previous day as traders looked to U.S. supply data due out this week that is expected to show rising inventories of crude. Light, sweet crude oil for December delivery climbed 2 cents to $58.38 a barrel in electronic trading on the NYME, after slipping $2.39 Monday to settle at $58.36 a barrel. Brent crude rose 6 cents to $58.74 a barrel on the ICE Futures exchange.

Gold traded at $600.70 an ounce on Tuesday, up $6.80 an ounce from Friday close of $593.90.

In morning European trading, the euro fell to $1.2685, compared with $1.2729 in New York late Monday. The British pound declined to $1.9001 from $1.9020. The dollar rose to 117.75 Japanese yen from 117.41 yen on Monday after the Bank of Japan suggested it would not rush into another rate increase.