India Down 4.6%, NYSE to Buy NSE Stake

Elena
10 Jan, 2007
New York City

A sell-off in large-caps like ONGC, HDFC, ICICI Bank and Reliance Communications weighed on the benchmark index Wednesday in a broad decline. Weakness in Asian markets and caution ahead of tomorrow

[R]10:30AM NY – 9:30PM Mumbai The Sensex shed 1.5% in a fifth straight day of losses.[/R]
The Sensex on BSE finished 204.17 points, or 1.5%, lower at 13,362.16, the lowest close since December 20th, 2006. The market-breadth was weak as 1,699 shares declined on BSE, 942 rose and only 45 shares were unchanged. For every advancer, there were almost two decliners. Of the 30 stocks in the Sensex only two advanced, while the rest declined. The turnover on BSE was Rs 3,632 crore, lower than Rs 5,167 crore on Tuesday. On NSE, the turnover was Rs 8,572.23 crore, compared to Rs 8,806.52 crore on Tuesday.

Economic news

New York Stock Exchange will buy 20% of the National Stock Exchange of India, together with Goldman Sachs and two other private equity funds for $490 million. The agreement was signed on Wednesday, valuing largest bourse in the country at about $2.5 billion.

Vodafone Group intends to become a key player in the mobile market in India. Wednesday, Vodafone would submit a formal bid to buy Hutchison Essar, the fourth-largest carrier in the country, Chief Executive Arun Sarin stated after meeting Trade Minister Kamal Nath. Following Vodafone, rival bidder Essar Group started on Wednesday due diligence, while another potential suitor Reliance Communications would begin the process Thursday.

Domestic car sales advanced 23% in December from a year earlier, the Society of Indian Automobile Manufacturers announced on Wednesday.

Trading highlights

New issue Shree Ashtavinayak was the most-active stock on BSE today with a turnover of Rs 364 crore followed by Pyramid Saimira and Reliance Communications.

Advancers

There were only two prominent advancers on BSE on Wednesday. Wipro gained 2.2% to Rs 594 and Satyam Computer edged 0.03% higher to Rs 467.90.

Shree Ashtavinayak Cine Vision ended at Rs 226.50 on its debut on Wednesday, topping its issue price of Rs 160. IFCI surged 21.6% to Rs 16.40 in the wake of its, along with other shareholders, selling of part of their holdings in the National Stock Exchange to NYSE Group and other foreign investors.

Decliners

Power equipment maker BHEL led the decliners, down 4.5% to Rs 2,146. Banks were under heavy selling pressure. ICICI Bank, with a 9.3% weight in the Sensex, shed 3% to Rs 883. State Bank of India plunged 3.3% to Rs 1,135. HDFC Bank declined 1.5% to Rs 998. HDFC Bank starts Q3 results tomorrow.

Oil leader ONGC declined 3% to Rs 890 and Cairn India shed almost 3% to Rs 133.55 on a high volume of 75.7 lakh shares traded on BSE. Telecoms were also badly hit with Reliance Communications leading the decliners in the sector, down 3.5% to Rs 408 in spite of 1.4 million new mobile subscribers in December 2006. Bharti Airtel lost 2% to Rs 611.

Although Wipro and Satyam Computer gained, TCS was down 1.7% to Rs 1,234 and Infosys also edged 0.2% lower to Rs 2,185.70. Infosys starts the Q3 earnings season tomorrow. The guidance is of between 4.1% - 7.3% growth in Q3 consolidated net profit of the company.

Cement stocks, managed to recover from the intra-day lows. Gujarat Ambuja Cements closed 0.3% down at Rs 139, off its low of Rs 136.10. Grasim shed 0.6% to Rs 2,809, off its low of Rs 2,757.50. Index heavy, Reliance Industries lost 0.7% to Rs 1,271.50.


[R]9:45AM Market opened, hurt by lower oil prices.[/R]
Wall Street started trading in the negative territory on Wednesday, reflecting weak oil prices and a profit warning from a major oil company. Chevron ((CVX)) fell 1.6% after it warned that its Q4 profit would be hurt by falling commodity prices. Exxon Mobil Corp. ((XOM)) weighed down blue chips, losing 0.6%. At the same time, the world''s biggest aluminum producer Alcoa ((AA)) helped limit losses for the Dow, rising 4% after it posted better-than-expected earnings. Apple ((AAPL)) provided some support to the tech-heavy Nasdaq, rising 2.3% after introducing its iPhone.

In merger-and-acquisition news, US Airways ((LCC)) boosted its offer for Delta, trying to pressure the bankrupt airline''s creditors to sign off on a deal that Delta has come out against. Shares of Delta rose 6%. In the first hour of trading, the Dow Jones industrial average fell 23.63, or 0.19%, to 12,392.97. The Standard & Poor''s 500 index was down 3.80, or 0.27%, at 1,408.31, and the Nasdaq composite index was down 9.88, or 0.40%, at 2,433.95.

[R]Trade deficit narrowed 1% in November.[/R]
Wednesday morning, the Department of Commerce released its report on U.S. international trade in goods and services in the month of November, showing that the trade deficit unexpectedly narrowed compared to the previous month. The report showed that the trade deficit narrowed to $58.2 billion in November from a revised $58.8 billion in October. Economists had expected the deficit to widen to $59.5 billion compared to the deficit of $58.9 billion originally reported for the previous month. The decrease in the size of the deficit came as an increase in the value of exports outpaced an increase in the value of imports. The report showed that the value of imports rose 0.9 percent to $124.8 billion, while the value imports edged up 0.3 percent to $183.0 billion.

Despite the narrower deficit in November, the report showed that the deficit for 2006 is running at an annual rate of $765.4 billion. Subsequently, the trade deficit is on track to surpass the record annual deficit of $716.7 billion set in 2005. The Commerce Department noted that the goods deficit narrowed to $64.7 billion in November from $64.4 billion in October due in part to a notable increase in exports of capital goods and a significant decrease in imports of industrial supplies and materials. At the same time, the services surplus widened to $6.5 billion in November from $6.3 billion in October, reflecting an increase in exports of travel services and a decrease in imports of other transportation services. The report also showed that the politically sensitive trade-deficit with China narrowed to $22.9 billion in November from $24.4 billion in October. Nonetheless, the deficit with China remained the largest by far.


[R]9:30AM NY- 2:30PM London The FTSE 100 declined Wednesday on financials.[/R]
By mid-afternoon, the FTSE 100 in London shed 32.8 points, or 0.45%, at 6.168.

Advancers

Supermarket William Morrison leads the gainers as it announced that same-store sales during the 6 week Christmas and New Year period rose by 6.3% excluding fuel and by 6.0% including fuel. The company advanced 5.56%.

Semiconductor designer ARC International surged to its highest level in over a year today as it announced second half and the full year revenue are expected to top forecasts. The company advanced 8.21%.

Biocompatibles, the pharma company, has predicted 2007 sales growth of 50%. The company gained 5.50%. JJB Sports, the sportswear retailer, stated it remains satisfied with its second half performance to date and festive trading period. The group gained 3.82%.

Property website Rightmove is still in focus following the bullish trading statement yesterday as UBS upgraded the shares to buy from neutral and hiked it price target. The company added 7.87%. Royal Dutch Shell also advanced on talk that OPEC is likely to consider more production cuts.

Decliners

Telecoms recruitment firm Glotel led the decliners, down 10.40%, though it warned that delays in US contracts would mean profits missing expectations this year. Mobile company Vodafone, down 1.51%, will make a bid for 67% stake in Hutchison Whampoa in India Hutchison Essar in the near future, chief executive Arun Sarin said today.

Northern Rock led the decliners in the banking sector. The company was off 2.17%. Legal & General also retreated 2.3%. Menswear retailer Moss Bros announced pre-tax profit is expected to be lower than the year before, as it struggles against a difficult menswear market. The company lost 0.66%.

Credit firm Experian gave up its earlier gains after it reported a 20% increase in third-quarter sales from continuing operations. Experian declined 1.26%.


[R]9:00AM Market futures traded lower due to weak oil prices.[/R]
U.S. stock futures pointed to a lower market opening Wednesday due to a drop in Latin American shares and steep declines in oil prices. Energy shares such as Exxon Mobil Corp. ((XOM)) and Chevron Corp. ((CVX)) are expected to come under pressure as crude fell to $55.07 a barrel. Concerns about oil prices largely overshadowed positive economic data. According to a Commerce Department report, the U.S. trade deficit fell unexpectedly by 1.0% in November to $58.2 billion, marking the third straight decline in the deficit and its lowest level since July 2005. Shares of Apple ((AAPL)) hit an all-time high on Wednesday before the bell, rising 1.7% after several brokerages raised their price targets. The advance came a day after the company unveiled its long-awaited iPhone.

Dow component Alcoa ((AA)) rose 4.5% in pre-open after reporting stronger-than-expected Q4 results. The world''s largest aluminum producer reported Q4 revenues increase 20% from a year ago to $7.8 billion, exceeding estimates for $7.6 billion. The revenue benefited from stronger demand for products sold in aerospace, commercial transportation and commercial building markets. Net income for the quarter rose 60% to $359 million, including after-tax charges of $386 million for restructuring and impairment. In deal news, US Airways Group Inc. ((LCC)) said it increased its takeover offer for bankrupt rival Delta Air Lines Inc. to $10.2 billion in cash and stock. S&P 500 futures were down 4.9 points, far below fair value. Dow Jones industrial average futures fell 43 points, and Nasdaq 100 futures slipped 10 points.


[R]8:00AM US Airways increased bid for Delta by 20%.[/R]
US Airways Group Inc. ((LCC)) increased Wednesday its offer for Delta Air Lines Inc. ((DALRQ)) by 20% to $10.2 billion after the first bid, valued at $8.4 billion, was rejected by the bankrupt airline. The increased bid amounts to $5 billion in cash and 89.5 million shares of US Airways stock. The original offer included 78.5 million shares of US Airways stock and $4 billion in cash. The value of the improved bid is expected to go even higher if US Airways'' stock gains after market opening.

US Airways said the increased offer is set to expire on February 1 unless creditors indicate support for the start of the due diligence process, which would open up Delta''s books to US Airways. US Airways also wants Delta to postpone a February 7 bankruptcy hearing.

Executives of airline Delta have expressed disapproval of a buyout by US Airways. The nation''s third-largest carrier has filed a reorganization plan that calls for it to emerge from bankruptcy by the middle of 2007 as a standalone company worth $9.4 billion to $12 billion. Although Delta management stands against the deal, the key role in deciding the airline''s future course will be played by the unsecured creditors committee.