Sensex in India Down Another 3%

Elena
12 Dec, 2006
New York City

Reserve Bank of India tightening of leding rules, three days ago, has kept investors worried about inflation and slowing economic growth. The bennchmark index lost almost 1,000 points in just three days, aided today by the unexpectedlly slow industrial production growth in October. Intense selling in banks and almost all Sensex stocks hit the market. Highly volatile market had weak breadth. The only advancers among large-caps was HDFC Bank, while the Bharti Airtel and Grasim led the decliners.

[R]10:30AM The Sensex slipped Tuesday another 3% on selling of large-cap stocks.[/R]
The Sensex on BSE finished 404.41 points, or 3.02% lower, at 12,995.05. The market-breadth was very weak as there were five decliners for every gainer. Out of 2,625 stocks traded on BSE, 2,160 declined, 424 advanced and 41 were unchanged today. HDFC Bank was the only advancer from the 30-issue Sensex index. The turnover on BSE was Rs 4,913 crore, higher than Rs 4,830 crore on Monday. The turnover on NSE was Rs 11,085.28 crore, much higher than Rs 9,344.45 crore on Monday.

Economic news

Indian Index of Industrial Production, gauging the growth in output of manufacturing, power generation and mining, advanced 6.2% during the month much lower than 9.8% in the same month last fiscal year. Manufacturing rose at 6% in October from 10.9% a year ago. Growth in production of consumer goods, durables and non-durables almost halted.

Most –active stocks

Reliance Industries was the most-active stock on BSE, with a total turnover of Rs 329.59 crore, followed by Indiabulls and Parsvnath Developers.

Decliners

Bharti Airtel led the decliners, losing 6.77% to Rs 566, on a volume of 3.18 lakh shares, having surged to an intra-day high of Rs 613.50. Index heavy Reliance Industries shed 2.30% to Rs 1,210. The stock recovered, after plunging to Rs 1,181.

Grasim declined 6.47% to Rs 2,529.40. There are reports that company will buy a stake in Austrian cellulose-fibre maker Lenzing AG in an effort to help the firm to get a foothold in the global viscose staple fibre market.

ACC lost 6.39% to Rs 970, SBI shed 5.52% to Rs 1,174.10, Tata Steel lost 3.39% to Rs 438, and Maruti Udyog dipped 3.20% to Rs 878. Tata Steel has obtained approval from US anti-trust authorities for the proposed acquisition of Anglo-Dutch firm Corus Group Plc, although it was oubidden by CSN of Brazil.

L&T lost 3.63% to Rs 1,384.20. GMR Infrastructure, Delhi International Airport operator, gave the company a contract worth Rs 5,400 crore on Monday, for design and construction of terminal, runway and associated works at the airport.

Shares of power equipment makers dipped on intense selling pressure. ABB saw its stock plummet 9% to Rs 3,442, Siemens slid 7.33% to Rs 1,043 while BHEL declined 3.94% to Rs 2,433.30.

Banking stocks continued to fall, due to the surprise CRR hike. Major decliners included Punjab National Bank down 5.02% to Rs 483.10, Kotak Mahindra Bank losing 1.56% to Rs 375, Indian Overseas Bank off 6.72% to Rs 103.35, Bank of Baroda shedding 8.01% to Rs 220.

SpiceJet dipped 3.21% to Rs 54.40, lower finish from an intra-day high of Rs 61.90, which was hit on board approval of a preferential issue of shares worth $118.5 million to foreign and domestic investors, including the Tatas, on a preferential basis. Tata group said that it is intrested in the compnay stock for ‘investment purpoe’ only.

Advancers

HDFC Bank was the only advancer of the stocks in the 30-Sensex index. It edged higher 0.10% to Rs 1,035 as 99,558 shares were traded. Rajesh Exports surged 5% to Rs 307.20, after the gold jewellery maker announced it will aggressively target real estate development. Garware Offshore Services gained 2.67% to Rs 200, after the statement from the company that its board will meet on December 20, 2006, to consider raising up to $25 million, and also increasing the foreign investment limit to 60%.

[R]9:45AM Stocks opened slightly lower ahead of Fed’s decision.[/R]
U.S. stocks opened lower on weak profit outlooks from retailer Best Buys and chipmaker Texas Instruments. Investors restrained from making significant moves ahead of the fed Reserve’s decision on interest rates and its accompanying economic statement are due at 2:15 p.m. EST.

Best Buy ((BBY)), the nation''s largest consumer electronics retailer, fell 4.1% as it reported 31 cents per share income rise, compared with net income of 28 cents a year ago, but missing expectations of 35 cents a share. Texas Instruments ((TI)) raised concerns after it cut its Q4 revenue outlook, due to weakening sales of semiconductors. However, JP Morgan analysts predicted that the worst will be over soon for the chipmaker, sending the stock slightly higher. On the positive news front, Goldman Sachs ((GS)) reported its Q4 earnings doubled to $6.59 per share, up from $3.35 per share last year. The stock lost 1%.

In economic news, the Commerce Department reported that the deficit fell to $58.9 billion in October, down 8.4% from September, reflecting a sharp decline by the oil price. The percentage drop was the biggest since December 2001. However, the U.S. deficit with China rose by 6.1% due to big increases in shipments of goods in preparation for Christmas shopping. In the first hour of trading, the Dow Jones industrial average fell 12.98, or 0.11%, to 12,315.50. The Standard & Poor''s 500 index slipped 0.89, or 0.06%, to 1,412.15, and the Nasdaq composite index fell 0.84, or 0.03%, to 2,442.02. Bonds rose, driving the yield on the benchmark 10-year Treasury note down to 4.51% from 4.52% late Monday.


[R]U.S. trade deficit sharply dropped in October.[/R]
Tuesday morning, the Department of Commerce released its report on U.S. international trade in the month of October, showing that the U.S. trade deficit narrowed much more than economists had been expecting. The report showed that the trade deficit narrowed to $58.9 billion in October from $64.3 billion in September. With the decrease, the deficit fell to its lowest level since August of 2005. Economists had been expecting the trade deficit to narrow to about $63.5 billion. The decrease in the size of the trade deficit came as the value of exports increased modestly, while the value of imports fell.

The report showed that the value of exports rose 0.2 percent to $123.6 billion, while the value of imports fell 2.7 percent to $182.5 billion. The Commerce Department noted that the goods deficit narrowed to $65.1 billion in October from $70.3 billion in September, as a decrease in the value of goods imports outpaced a decrease in the value of goods exports. At the same time, the services surplus widened to $6.2 billion in October from $6.0 billion in September. The wider services surplus came as the value of services exports rose more than the value of services imports. The report also showed that the politically sensitive trade deficit with China widened to $24.4 billion in October from $23.0 billion in September. This marks the third consecutive month that the deficit with China has set a new record high.


[R]9:30AM London declines as inflation soars raising concerns of a rate hike.[/R]
The FTSE 100 index declined 16.5 points, or 0.3%, to 6,143.3.

Economic news

Inflation had hit its highest level for almost a decade after the biggest monthly rise on the CPI, index, up 2.7%, since its 1997 inception. The RPI rate, which includes mortgage payments, rose to 3.9 %.

Decliners

The news led mortgage lenders Bradford & Bingley, Alliance and Leicester and homebuilder Persimmon lower on concerns the Bank of England will raise rates early next year. Oil companies dropped as crude prices fell 1% overnight. Royal Dutch Shell was 1.2% weaker at and BP lost 0.9%.

Standard Chartered, the emerging markets-focused bank, fell 1.5% after a trading update received a flat reaction. Mortgage income was struck by increasing interest rates and fierce competition.

Drax Group, the electricity generator, fell after Merrill Lynch and Morgan Stanley both issued negative comment on the stock during the previous session. The shares lost a further 2.3%.

Among mid-caps, newspaper publisher Johnston Press shed 6.4% after it took a 15 million pounds impairment charge for asset write-downs and restructuring and stated it established no improvement in the advertising market.

Property stocks British Land, lower 0.82% and Slough Estates, down 0.34%, also featured amongst the decliners.

Bloomsbury Publishing was battered after it warned on profits. The publisher of the Harry Potter books plummeted 29% in response to news of disappointing Christmas sales and delays in payments from rights to reference books included in 2006 forecasts.

Advancers

Cadbury Schweppes advanced 2.2% after problems at its UK and Nigerian businesses were not enough for it to cut its expectaions. The company said it hoped for the same growth for the full year in the middle of its existing range.

Carpetright raised first half profits by 11.2%. Revenue growth and margin improvements more than countered increased costs. Carpetright advanced 2.12%.


[R]9:15AM Stocks futures traded lower ahead of Fed reserve’ decision.[/R]
U.S. stock market futures traded lower, awaiting the Fed Reserve decision on interest rates. Texas Instruments ((TI)) also weighed as it lowered revenue forecast. Earnings from electronics retailer Best Buy and investment bank Goldman Sachs helped market sentiment. Goldman Sachs Group Inc. ((GS)), the U.S. biggest investment bank, said Q4 profit doubled on record merger activity and robust stock market trading. The company reported a profit of $3.15 billion, or $6.59 per share, compared with $1.63 billion, or $3.35 per share a year ago, easily beating estimates of $6.04. Revenue soared to $9.41 billion, up from $6.4 billion last year. In another earnings report, Best Buy Co. ((BBY)) said Q3 profit rose 9% to 31 cents a share, up from 28 cents a year ago, but results missed expectations of 35 cents as the consumer electronics retailer made greater use of promotions to move merchandise. Revenue rose 16% to $8.47 billion, from $7.33 billion last year. Its shares fell 5% in pre-market trading.


[R]8:00AM Nasdaq launched a $5.3 billion hostile bid.[/R]
Nasdaq Stock Market ((NDAQ)) made a 2.7 billion-pound ($5.3 billion) hostile bid for the London Stock Exchange after failed attempts to persuade the LSE’s board of directors to back a deal. Nasdaq offered 1,243 pence a share for the U.K. exchange, the same terms that it announced in November. Nasdaq also confirmed that it will not raise that price unless the LSE''''s board accepts a friendly approach or another bidder emerges. The U.S. exchange plans to tap a group of leading banks for $5.03 billion in financing, and will also issue $778 million in equity to help pay for the bid.

Nasdaq, an owner of almost 30% of the U.K. exchange, is appealing directly to the shareholders and the U.S exchange said investors will have to accept the offer until Jan. 11. Nasdaq said in a Form 8-K filing with the SEC that the considerable debt it will take on to finance the deal could limit its financial flexibility. Shares in the LSE slipped 0.2% at 1,317 pence in early London trading, but remained above the offer price on expectations the U.K. exchange''s board could accept a higher bid.

In addition, Nasdaq announced plans to raise fees for companies listing their shares in the U.S., although it also promised to hold trading fees flat if it succeeds in accomplishing the buyout deal with the LSE.


[R]7:30AM Japan advances for second day in a row Tuesday, other markets fall.[/R]
Asian markets finished mixed. In Japan, the Nikkei 225 Index gained 0.7% to end at 16,637.78. Exporters Honda added 1.5% and Sony put up 2.1%. Toyota also advanced 1.12% while Canon shares moved 0.31% higher. Stocks in fishery and agriculture sectors also surged on a welcomed merger plan by two seafood makers in Japan. Maruha Group and Nichiro stated Monday they intend to merge their operations through a stock swap in October 2007. Maruha surged 6.4%, as Nichiro soared 14%.

The Hang Seng Index retreated 0.1% to 18,907.33. Among decliners were China Merchants slipping 4% and shoemaker Yue Yuen falling 2%. Airline Cathay Pacific shed 2% while China Resources gained 3.2%. HSBC inched higher 0.5% and Hang Seng Bank closed unchanged.

In Seoul, LG.Philips LCD and Samsung Electronics weighed the market lower. The Korea Composite Stock Price Index, or Kospi, shed 1% to 13,76.98. Liquid-crystal-display marker LG.Philips LCD finished down 4.3% on news of investigations of the LCD maker for fixing prices. Samsung Electronics also closed lower, declining 0.7%.

Around the region Australia S&P/ASX 200 gained 0.07% to end at 5,473.60, New Zealand NZSX-50 ended higher 1% at 3,298.11. Taipei Weighted index lost 2% to 7,458.56 while the Singapore Straits Times index advanced 0.23% to 2,893.81. The Shanghai Composite index added 1.8% to 2,218.95.


[R]6:30AM European markets moved slightly higher on Tuesday on retailers.[/R]
European markets were higher on Tuesday. By mid morning, the FTSE 100 in London was down 0.2% at 6,147.2, while Frankfurt Xetra Dax gained 0.1% to 6,477.19, and the CAC 40 in Paris was flat at 5,428.25.

Advancers

Metro, continued its upward movement as investors expect big sales at its two main consumer electronics stores before the government imposes higher sales tax next year. Metro shares gained 1.2%.

Ahold, the Dutch food retailer, advanced 2% after the former chief financial officer of its US Foodservice unit was given a three years probation for his role in the accounting fraud.

Tesco advanced 1.8% following its statement it was buying out the 50% it does not already own in Hymall, a China-based supermarket chain. Carrefour, also owning supermarkets in China, added 1.9%.

Remy Cointreau, up 4.61%, hit a ten years high after its statement that its first-half comparable champagne profit soared 49% on increased Piper-Heidsieck prices, volumes and improved product.

Umicore, based in Belgium, surged 5.9% on its agreement to combine its zinc smelting assets with Zinifex of Australia in a deal that would create the largest zinc maker in the world.

Decliners

Oil groups sank after crude declined more than 1% overnight on the NYME. Total, the French group, shed 0.9%, BP in Britain lost 1.3% and Austrian OMV was off 0.4%.

Deutsche Börse was 1% down after WestLB reduced its rating from add to hold. Philips Electronics moved down 0.6% after its LG.Philips LCD joint venture in South Korea lost almost 8% in the wake of investigations into price fixing.

Oil and gold

Crude oil gained on rumors that the OPEC, may agree to reduce output this week to stabilize prices. Crude oil for January delivery added 34 cents, or 0.6%, to $61.56 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude oil for January settlement was 19 cents higher to $62.03 a barrel on the ICE Futures exchange in London. Gold for immediate delivery gained $0.70, or 0.1%, to $631.15 an ounce.

Currencies

The euro bought $1.3237 in morning European trading, slightly lower than the $1.3251 it bought in New York late Monday. On Tuesday, the British pound moved upward to $1.9599 from $1.9587. The dollar slipped Tuesday against the Japanese yen, buying 116.82 yen, down from 116.88 yen on Monday.