Volatile Recovery in India

Elena
13 Dec, 2006
New York City

Trading was extremely volatile on Wednesday as the benchmark index swung almost 400 points from low to high. Investors were covering short positions today and taking new long positions that helped the market rebound. Reliance Communications was the leading advancers, Bharti Airtel also surged. Reliance Industries ended the session with a significant gain. Banks pulled off after the recent steep decline. ONGC and Tata Steel led the decline.

[R]10:30AM The Sensex rebounded on Wednesday in a volatile trading.[/R]
The Sensex on BSE finished 186.32 points, or 1.4% higher, at 13,181.34. The market-breadth was positive as there were two gainers for every loser. As 1,652 shares gained on BSE, 849 declined and 68 shares were unchanged. The session was extremely volatile as the index traded in a range of 393 points during the day. The turnover on BSE was Rs 4,404 crore, lower than Rs 4,931 crore on Tuesday. On NSE, the turnover was Rs 9,635.82 crore, lower than Rs 11,085.28 crore on Tuesday.

Economic news

According to Agricultural Minister sugar export ban is likely to be exported sooner than expected on better harvesting season. The ban would be raised within a week, officials claim. It was imposed in July to reduce increasing prices due to tight supplies, and was about to run until the end of the financial year in March.

Most –active stocks

Reliance Industries was the most-active stock with a turnover of Rs 192 crore followed by Parsvnath, Reliance Communications and HDFC.

Advancers

Reliance Communications rallied 7% to Rs 432.90, after media reports linking the company with three US private equity groups, for buying the Indian operations of Hutchison Telecommunications International in a deal worth more than $14 billion. Bharti Airtel also jumped 4% to Rs 601 and Reliance Industries gained 2.6% to Rs 1,240.50.

Bank shares bucked the recent downtrend and inched higher after the Federal Reserve Bank in the U.S. on Tuesday did not change short term interest rate. Banking stocks gained led by SBI rising 4% to Rs 1,230.90, ICICI Bank gaining 2.7% to Rs 828 and HDFC Bank advancing 1.9% to Rs 1,050.

Cement shares advanced on buying interest at the lower level. Grasim surged 5.7% to Rs 2,650, ACC gained 3.9% to Rs 1,010 and Gujarat Ambuja Cements moved 3.9% up to Rs 135.

Pharma large-caps also gained. Dr Reddy’s Lab rallied 5% to Rs 792.50 and Ranbaxy moved 2.3% higher to Rs 368. Software heavy Infosys staged a solid intra-day recovery in the last half an hour of trade, advancing 0.1% to Rs 2,166.

L&T gained 2.2% to Rs 1,425, due to reports that L&T Infotech, on Wednesday, had struck an agreement to acquire US-based GDA Technologies Inc.

Glenmark Pharmaceuticals soared 7.8% to Rs 552.35, following the statement from the company on Wednesday that it had applied for clinical trials for a new pain-relieving compound to be launched in 2011.

Decliners

ONGC led the decliners, dipping 2% to Rs 787.90., ONGC is in talks with to Total SA of France and Royal Dutch Shell over offering between 10% and 15% stake in two Nigerian blocks.

Tata Steel plunged 1.3% to Rs 434.55, on worries of a bidding feud with CSN of Brazil, for acquiring Anglo-Dutch steelmaker Corus. Reports say that Tata Steel may lift its bid per Corus share, raising the price to over $10 billion, to outbid CSN offer.

Hindusta Lever shed 2% to Rs 219, Cipla and Hero Honda declined around 1% each at Rs 238 and Rs 719, respectively.

Other news

Lakshmi Mittal, owner of Mittal Steel, will pay Russian Lukoil $980 million (Rs 4,410 crore) to acquire a 50% stake in a Kazakhstan oil firm and is likely to transfer it later to ONGC-Mittal Energy Ltd (OMEL), venture with state-run ONGC.


[R]9:45AM Stocks opened higher on strong retail sales.[/R]
Stock markets opened higher, as better-than-expected retail sales in November eased concerns about the extent of a slowdown in the economy. Sales rose 1%, much higher than the 0.2% gain expected by economists. The news indicated that the Fed Reserve is not likely to cut interest rates anytime soon. Consequently, Treasury prices dropped. Yields in turn advanced, with the yield on the benchmark 10-year Treasury note jumping to 4.54% from 4.48% late Tuesday.

Retail stocks were among the best performers in early trading. Dow component Wal-Mart ((WMT)) was among the biggest blue-chip gainers, adding 1%. Rival discount retailer Target Corp. ((TGT)) also moved higher. Home Depot ((HD)), the nation''s biggest home improvement chain, rose 1.3% after it announced the acquisition of 12 stores there in China.

Merger talks between airlines UAL ((UAUA)) and Continental Airlines ((CAL)) also helped boost the sentiment. UAL shares rose 3.9%, Continental Airlines jumped 5.9%. The news helped boost other airline stocks. AirTran ((AAI)) edged higher, while Midwest ((MEH)) surged 22.4%. In midmorning trading, the Dow Jones industrial average rose 11.45, or 0.09%, to 12,327.03. The Dow hit an intraday high of 12,368.61, surpassing the old record of 12,361.00. The Standard & Poor''s 500 index was up 1.61, or 0.11%, at 1,413.17, and the Nasdaq composite index added 2.02, or 0.08%, to 2,433.62.


[R]9:30AM The FTSE 100 advanced on Tate despite weak banking stocks.[/R]
In mid-day trade the FTSE 100 in London was 17 points, or 0.4%, higher at 6,184.4 having opened the session lower.

Advancers

Tate & Lyle gained 3.8 per cent as Deutsche Bank upgraded clients to buy the shares ahead of a trading update next week. Car rental group Avis Europe stated that it expected for underlying 2006 pre-tax profit to have improved after a stronger-than-anticipated second-half. Avis Europe advanced 5.71%.

Amec announced that profits in 2006 will be 15 million pounds below previous expectations, in view of restructuring and legal costs in UK construction and a weaker than expected performance in pipeline and nuclear capital projects. Amec gained 3.53%.

Discount furniture retailer Homestyle, higher 4.52%, has consented to a takeover by its main shareholder Steinhoff of South Africa in a deal worth around 326.4 million pounds.

Lehman Brothers upgraded Anglo American to equal-weight from underweight as the broker also raised its price target, while JP Morgan upgraded its target on Rio Tinto. Anglo American advanced 0.20%, while Rio Tinto gained 0.58%.

Decliners

Sports betting group 32Red shares slumped 23.85% as it warned over trading and revealed a bank covenant breach.

Vigilant Technology plunged 18.18% after giving a warning that results for 2006 will be below current market forecasts, while a warehouse fire will delay some shipments.

Alliance & Leicester lost opening ground to trade down 1.08%, the biggest large-cap decliner, on concerns about mounting bad loans.


[R]9:00AM Stocks futures rallied on better-than-expected retail sales.[/R]
U.S. stock market futures posted solid gains Wednesday, boosted by strong retail sales and deal talk in the airline sector. Data on business inventories, expected to show continuing growth at 0.4% pace, is also due out today. The dollar gained some ground on the data, rising 0.5% against the yen at 117.38 and 0.5% vs. the euro at $1.3210.

Seasonally adjusted retail sales rose 1% in November, the largest gain since July, coming in well above economist estimate. In corporate news, UAL Corp. ((UAUA)) and Continental Airlines ((CAL)) were reportedly in talks about a possible merger that would create the largest U.S. domestic carrier. Continental shares rose 4.9% and UAL shares gained 5%. Among companies, driven by analyst comments, Apple ((AAPL)) shares advanced 1.4% to $87.36 after Morgan Stanley raised its stock price target. Elsewhere, Cooper Cos. ((COO)) fell 6% in pre- open after the company cut its forecast for 2007 revenue to a range of $920 million to $960 million. S&P 500 futures rose 4.30 points to 1,429.30 and Nasdaq 100 futures added 6.00 points at 1,809.00. Dow industrials futures rose 38 points at 12,450.

[R]Retail sales rose above expectations.[/R]
Wednesday morning, the Department of Commerce released its report on retail sales in the month of November, showing that sales rose much more than economists had expected. The increase was partly due to a rebound in sales at gas stations. The report showed that retail sales rose 1.0 percent in November after a revised 0.1 percent decrease in October. Economists had expected retail sales to increase by a much more modest 0.2 percent compared to the 0.4 percent drop originally reported for the previous month. The stronger than expected sales growth was partly due to a significant increase in sales at electronics and appliance stories, which surged up 4.6 percent in November after coming in unchanged in October.

As mentioned above, a rebound in gas station sales also contributed to the overall sales growth, with gas station sales rising 2.3 percent in November following a 5.3 percent decline in the previous month. The decrease in October reflected a drop in gas prices. The report also showed that sales by motor vehicle and parts dealers rose 0.9 percent in November following a 1.0 percent increase in October. The Commerce Department said that retail sales, excluding sales by motor vehicle and parts dealers, rose 1.1 percent in November after a 0.3 percent decrease in October. The increase in ex-auto sales exceeded economist estimates of 0.3 percent growth.


[R]7:30AM Asian markets finished mixed with Japan up and HK down.[/R]
Asian markets closed mixed on Wednesday. The Nikkei 225 Index in Japan edged higher 0.3% to 16,692.93. Carmakers and other exporter stocks were buoyed by the weaker yen against the dollar. Nissan advanced 1.4% and Sony rose 1.9%. Airline stocks also gained tracking a decline in oil futures prices. All Nippon Airways advanced 1.4%.

Declines in Chinese telecommunications companies in Hong Kong led stocks lower. The Hang Seng Index shed 1.0% to 18,718.19. Fixed-line operator China Telecom fell 3.96% and China Netcom shed 1.65%. China Mobile lost 2.62%. China Unicom finished down 4.12% on dwindling hopes for a near-term deal to break up the company.

The Korea Composite Stock Price Index, or Kospi, advanced 0.5% to 13,83.28. Shinhan, the second-largest banking institution in the country, advanced 1.9% on reports that it had agreed with the creditors of LG Card on the final terms of its acquisition of LG Card.

The S&P/ASX 200 Index in Australia moved up 0.3% to close at 5,488.2. Shares of CSL advanced 7.9%, while Toll Brothers added 4.9%. The blood-products group CSL raised its profit guidance and transport group Toll stated it would spin off its infrastructure assets into a separate unit.

The market in Taiwan dropped 0.1% to 7,450.30. Fubon Financial advanced 2.5% and Cathay Financial gained 2.0%, while Pacific Construction plunged 7%. Singapore Strait Times Index shed 0.3% to 2,884.15 and New Zealand NZX-50 Index inched up 0.4% to 3,945.98. Shanghai Composite Index gained 0.2% to 2,223.45.


[R]6:30AM European markets move slightly higher Wednesday as banks rally.[/R]
European markets were higher on Wednesday. By mid morning, FTSE 100 in London was up 0.1% to 6,160.7, Frankfurt Xetra Dax was flat at 6,476.33, and the CAC 40 in Paris was 0.1% higher at 5,434.65.

Advancers

Inditex, owner of the Zara, Pull and Bear and Massimo Dutti clothing brands, advanced 4.6% as its net income for the first nine months of 2006 grew 22% to 634 million euros as revenue also rose 22%, to 5.67 billion euros.

Raiffeisen International, the Austrian bank with significant operations in central and eastern Europe, including Russia, advanceed 2.6%, after Citigroup upgraded it to buy and raised its price target.

Erste Bank, another Austrian bank which also has substantial holdings in eastern Europe, gained 1%. Dutch bank ABN Amro advanced 3.3% after putting forward impressive strategy for next year.

Fashion retailer Hennes & Mauritz gained 0.6% in Stockholm, while London-listed peer Next advanced 1.9%.

Lagardere, the largest publishing group in France, rose 3.5% in Paris after UBS analysts upgraded their rating on the media company to buy from neutral.

Decliners

Safran, the French aero engine maker, fell 6.4% after reducing its full-year operating profit margin target to 4% from its previous goal of 5.5-6%.

Oil and gold

Crude oil held near a two-week low after the IEA reduced its forecast for Chinese demand. Crude oil for January delivery fell 13 cents to $60.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange in early trading in London. Brent crude fell 31 cents, or 0.5%, to $61.21 a barrel and traded at that price on the ICE Futures exchange in London.

Gold declined in London for a second straight day as oil prices traded close to the lowest in two weeks. Gold for immediate delivery in London fell as much as $1.70, or 0.3%, to $628.35 an ounce.

Currencies

The U.S. dollar traded mixed versus other major currencies in European trading Wednesday. The euro was at $1.3268, down from $1.3277 late Tuesday. The British pound traded at $1.9711, up from $1.9700. The dollar bought 117.08 Japanese yen, up from 116.90.
UAL Corp. and Continental Airlines were reportedly in talks about a possible merger that would create the largest U.S. domestic carrier.