Volatile India Slips, Inflation at Record

Elena
19 Jan, 2007
New York City

The market witnessed an extremely volatile session, although it opened with a positive gap. Weaker-than expected Q3 results from Satyam Computer weighed on the benchmark index later. Investors resorted to profit-taking in pharma and tech stocks and the Sensex plunged. It later recovered to some extent on fresh buying in Reliance and ITC. Cement shares bucked the downtrend and advanced. Reliance Communications led the gainers, while Satyam led the decliners.

[R]10:30AM NY-9:30PM Mumbai – The Sensex retreats in volatile trade, Satyam plunges.[/R]
The Sensex on BSE finished with 35.04 points, or 0.25%, lower at 14,182.71. The market-breadth weakened in later trading as 1,642 shares declined, 1,030 advanced and 41 remained unchanged on BSE. Of the 30 stocks in the Sensex, 19 declined, while the rest advanced. The turnover on BSE was Rs 4,126 crore, lower than Rs 5,053 crore on Thursday. On NSE, the turnover was Rs 9,053.77 crore, compared to Rs 10,178.12 on Thursday.

Economic news

Wholesale prices-based inflation crossed 6% for the first time this fiscal year It surged by 0.54% against 5.58% in the previous week. Prices of common-use items like, some pulses, tea, tomatoes and coconut, are causing concern, as well as prices of some manufactured items like steel products and edible oil which have risen too.

Trading highlights

Satyam Computer Services Ltd posted a 25% increase in Q3 profit but it missed forecasts and cut full-year sales estimate on a firmer rupee. Consolidated net profit for October-December rose to Rs 337.23 crore for Q3 of this fiscal year from 2.70 billion a year earlier.

Tech Mahindra was the most-active stock with a turnover of Rs 335.20 crore followed by Reliance and Satyam.

Advancers

Reliance Communications led the advancers, up 3.11% to Rs 449.90, on a volume of 14.79 lakh shares, rebounding from a low of Rs 431, also hitting a high of Rs 450. Gujarat Ambuja Cements gained 2.24% to Rs 148.50, expecting strong results from the company. Cigarette maker ITC added 1.77% to Rs 175.

Index heavy Reliance Industries advanced 0.88% to Rs 1,379, on a volume of 12.75 lakh shares. The stock soared to an all-time high of Rs 1,409, in early trade. ICICI Bank advanced 1.46% to Rs 986, recovering sharply from its low of Rs 955.40. JK Lakshmi Cement surged 7.90% to Rs 181.65, on reporting 386% surge in net profit for December 2006 quarter, to Rs 55.06 crore. Net sales soared 50% to Rs 228.64 crore.

Decliners

Satyam Computers led the decliners, down 5.75% to Rs 485.70, on 26.91 lakh shares. It dipped to a low of Rs 476, as results missed expectations. Ranbaxy was down 3.77% to Rs 414, ONGC lost 2.68% to Rs 892.25 and Wipro was down 3.23% to Rs 620.25. Reliance Energy slipped 2.89% to Rs 512.90. Its Q3 December total income increased Rs 1,820 crore Rs 1,137 crore, while net profit advanced to Rs 201 crore, from Rs 164 crore.

IT stocks were under heavy selling pressure. TCS declined 1.66% to Rs 1,293, Infosys Technologies shed 0.93% to Rs 2,199 and Mphasis BFL was down 0.26% to Rs 290. Auto shares also declined. Bajaj Auto lost 2.11% to Rs 2,725, Maruti Udyog edged down 0.78% to Rs 911 and TVS Motor Company was off 0.75% to Rs 79.30.

Tech Mahindra plunged 6.88% to Rs 1,769.50. Consolidated profit-after-tax before write-back of tax provision increased 17% to Rs 166.70 crore. Consolidated revenue advanced 10% on a sequential basis to Rs 769.80 crore.

Hindustan Construction Company fell 2.53% to Rs 154, after it reported a 2.9% decline in net profit in December 2006 quarter to Rs 21.99 crore from Rs 22.66 crore in December 2006 quarter.


[R]9:45AM Market opened little changed, following IBM and GE financial reports.[/R]
U.S. stocks opened near the flat line after quarterly profits from IBM ((IBM)) and a conservative outlook from General Electric ((GE)) raised worries about corporate profits. The two Dow components fell 4.7% and 1.9%, respectively. IBM losses added to the recent weakness of technology stocks, with the Nasdaq down over 2% for the week, dragged down by disappointing outlooks from Intel Corp. ((INTC)) and Apple ((APPL)).

In addition, Motorola Inc. ((MOT)), the world''s second-largest maker of cell phones, said Friday its Q4 profits dropped 48% despite record sales. Net profit was $624 million, or 25 cents per share, down from $1.2 billion, or 46 cents per share a year earlier. Revenue rose 17% to $11.8 billion, up from $10 billion a year ago and slightly above the $11.7 billion estimate. Shares of the mobile phone maker added 1.2% in early trading. Shares of energy companies advanced, with Exxon Mobil Corp. ((XOM)), up 0.6%, and ConocoPhillips ((COP)), up 0.8%, as crude oil rose to $50.74 a barrel. In the first hour of trading, the Dow Jones industrial average was down 6.01, or 0.05%, at 12,561.92. The Standard & Poor''s 500 index was up 1.97, or 0.14%, at 1,428.34, and the Nasdaq was down 0.12, or less than 0.01%, at 2,443.09.


[R]9:30AM NY-2:30PM London The FTSE was slightly lower on Friday in flat trade.[/R]
The FTSE 100 was off 9 points, or 0.20%, at 6,198 in late afternoon in London.

Advancers

Sweetener group Tate & Lyle, up 1.67%, remains a top advancer on reports that a private equity group is considering tabling a bid for the group.

Anglo-Dutch steel manufacturer Corus is 1.30% higher supported by reports that Tata Steel of India could be ready to improve its offer for the group. Tata is believed to have dismissed the news.

Intercontinental Hotels is also attracting support, advancing 3.27%, on talk of private equity and buy-out interest.

UBS turned buyer on Land Securities, up 0.99%, upgrading its stance to buy from neutral to take account of its conversion to REIT status.

Online auctioneer QXL Ricardo, 11.89% higher, is strong again after yesterday''s impressive third quarter numbers.

Decliners

Mice Group plunged 25.41%, blaming project delays in the US, cancellations, bad debt and foreign exchange losses for a warning that profits for the year will be significantly reduced.

Retail software group NSB Retail dipped 10.85%, warning that annual profits will come in below market expectations owing to a delay in the signing of some customer contracts.

Miners were down once again, reacting to a decline in copper prices. The worst affected were Kazakhmys shedding 0.10% and Vedanta, 0.90% lower.


[R]9:00AM Market futures moved lower, as IBM Q4 results disappointed.[/R]
U.S. stock futures declined as investor disappointment over IBM''s Q4 results offset solid reports from Citigroup and General Electric. Shares of Dow component IBM ((IBM)) dropped 5% in pre-open trading, as investors were disappointed with quarterly results. Although the company''s profit rose 11% on 7.5% revenue growth, some investors had looked for more. The company projected 10% earnings per share growth in 2007 which is at the lower end of its target.

Another blue-chip stock, Citigroup Inc. ((C)), the nation''s largest bank, reported Q4 profit decline to $5.13 billion, or $1.03 a share, down from $6.93 billion, or $1.37 a share a year earlier. Revenue hit a record $23.83 billion, up from $20.78 billion in 2005. The bank’s quarterly results beat Wall Street expectations of $1.00 a share on revenue of $22.45 billion. The latest quarter''s results included $415 million in charges. The financial services giant also raised its dividend by 10% to 54 cents a share.

Again on the Dow, General Electric Co. ((GE)), diversified industrial products and media conglomerate, said Q4 profit more than doubled, boosted by strong revenue growth in its infrastructure, health care and financial services businesses. Net income totaled $6.58 billion, or 64 cents per share, up from $3.16 billion, or 30 cents per share, a year ago when the company took a $2.7 billion charge. GE is also restating financial results for the years 2001 through 2005 and the first three quarters of 2006 to adjust accounting for interest rate swaps in part of its financial services commercial paper program. Looking ahead, GE said it expects earnings per share from continuing operations to rise between 10% and 12% for all of 2007 and between 8% and 13% in the current Q1. the stock dropped 2% in pre-open.

Elsewhere, Coldwater Creek''s shares ((SWTR)) tumbled 23% after the women''s apparel company slashed its Q4 earnings outlook. Shares of fiber-optic components maker JDS Uniphase ((JDSU)) surged 11% in pre-open trading after the company lifted its Q2 forecast. In corporate news, Morgan Stanley''s ((MS)) real-estate arm agreed to buy upscale hotel operator CNL Hotels & Resorts for $6.6 billion. S&P 500 futures slipped 0.60 of a point to 1,432.60 and Nasdaq 100 futures were down 3.25 points at 1,802.75. Dow industrial futures slipped 18 points to 12,585.


[R]8:00AM IBM reported 11% profit rise in Q4, due to cost cuts and software acquisitions.[/R]
International Business Machines Corp. ((IBM)) reported late Thursday an 11% profit increase in Q4 to $3.54 billion, or $2.31 per share, on revenue of $26.3 billion, well above the $2.19 per share and $25.7 billion in revenue expected by analysts. Company’s revenue rose 7% in the fourth quarter, marking the fastest growth in 2006. The quarterly financial results surpassed last-year levels, with profit of $3.19 billion, or $1.99 per share, and revenue of $24.4 billion. However, profit in that comparison quarter was dragged down about $200 million after taxes, or 12 cents per share.

IBM posted a record number of contract signings, a division that accounts for more than half of the company''s revenue. In Q4, the company closed $17.8 billion in services contracts, a hefty leap from $10.5 billion in the prior quarter and $11.5 billion a year ago. In the quarter itself, IBM''s services division posted revenue of $12.8 billion, up 6% from the prior year. IBM''s next-largest division, the hardware-focused systems and technology group, posted a 3% increase to $7.1 billion. IBM''s software nit which is the most profitable one, posted 14% higher revenue to $5.6.

For 2006, IBM earned $9.49 billion, or $6.11 per share, on revenue of $91.4 billion. That marked a 20% increase in net profit from 2005. The increase in earnings per share was even higher than the net profit figure because IBM spent $8 billion buying back its stock in 2006, reducing the number of shares on the market. The company expects 2007 earnings to be in line with current forecasts. Despite the positive results, IBM stock was down 5% in pre-market trading.


[R]7:30 AM Asia finished mixed on Friday on weak technology stocks.[/R]
Asian markets finished mixed on Friday. The Nikkei Index in Japan finished the day 0.4% lower at 17,310. Stocks closed lower on profit-taking in tech stocks such as Tokyo Electron and Nikon, while banks declined on the decision of Bank of Japan to leave interest rates intact. Advantest shed 3.5%, Tokyo Electron lost 2.5% and Fujitsu slipped 2.1%. Nikon was off 3%, while Toshiba skidded 1.5%.

Hong Kong Hang Seng Index gained 0.3% to 20,328. HSBC rose 1.1%, after Morgan Stanley reiterated its overweight rating on the bank. China Mobile gained 0.4% ahead of the weekend release of its December operating data. South Korea Kospi Index shed 1.6% to 1361. Chip maker Hynix, which plunged 5.9% to a 6-month intraday low, ended 4.9% lower. Samsung Electronics also fell 1.7%.

The Shanghai Composite Index soared 2.7% to 2,832. Advances in banks on hopes of strong earnings results and a rebound in the property sector after recent sharp falls helped stop a two-day drop on the leading stock index of China. China Merchants Bank rose 5% and ICBC gained 1.1%.

Australian S&P/ASX 200 closed slightly higher at 5,673. Energy stocks responded to lower oil prices. Woodside Petroleum, the second-largest oil producer in Australia eased 2%. Santos also fell, closing 1.4% lower. On the other hand, the banking sector ended stronger, as National Australia Bank gained 0.5% and Westpac advanced 0.8%. Taipei closed 0.7% lower at 7,840.


[R]6:30 AM European stocks dropped as tech stocks countered gains in their shares.[/R]
European markets were lower on Friday. By mid morning, London FTSE 100 lost 0.3% to 6,194.5, Frankfurt Xetra Dax fell 0.3% to 6,667.46, and the CAC 40 in Paris shed 0.2% to 5,544.36.

Decliners

The lower-than-expected full-year profit forecast of Lam hit chip-related stocks in Europe. Dutch company ASML Holding fell 1.2%, while German chipmaker Infineon shed 3.5%, and Franco-Italian group STMicroelectronics lost 1%.

Euronext fell 3.4%, left with few hopes of a counter bid to rival the 14 billion euros agreed merger with NYSE Group,

French utility Suez lost 1.6% in Paris and ThyssenKrupp also declined 0.8% after recent gains. It said provisional figures show that Q1 profit before tax rose to 1 billion euros, or $1.29 billion, from 425 million euros last year, after sales rose 12% to 12.2 billion euros.

Advancers

Vinci, the French public works and transport concessions company, gained 4.6% after Artemis, said it had acquired a 5.1% stake and was open for any opportunity. French building materials group Saint Gobain rose 2.3% after Credit Suisse raised its rating from neutral to outperform” and raised its price target.

Schneider Electric gained 2.2% after the French electrical products group announced that its Q4 sales rose 12.3% to 3.66 billion euros, helped by a good performance in Europe. Fiat gained 3.3% after UBS upgraded the stock from neutral to buy and lifted its price target.

Shares in Deutsche Börse, the German stock exchange operator, rose 2.8% following reports it was considering dividing its managment structure into three sectors, concentrating on internal growth rather than acquisitions.

Oil and commodities

Oil prices fell in Asian trading Friday after the U.S. Energy Department said U.S. crude inventories rose by the most in more than four years. Light, sweet crude for February delivery dropped 8 cents to $50.40 a barrel in electronic trading on the New York Mercantile Exchange. February Brent crude on London ICE Futures exchange added just 2 cents to trade at $51.77 a barrel.

Gold headed for its second consecutive weekly gain in London as the dollar fell. Gold for immediate delivery rose $1.10, or 0.2%, to $628.80 an ounce in early trade in London. Other precious metals also gained including silver which was up 1 cent to $12.65, palladium added $1 to $340, while platinum dropped $6.50 to $1,151.50 an ounce.

Currencies

The euro was a little higher against the U.S. dollar on Friday. The 13-nation euro bought $1.2971 in morning European trading, slightly above its level of $1.2959 in New York late Thursday. The British pound slipped to $1.9716 from $1.9733. The dollar edged up to 121.29 Japanese yen, from 121.26 yen.