CPI Opposition to Nuclear Deal, Sensex Falls

123jump.com Staff
23 Aug, 2001
New York City

Sensex in India fell sharply in the afternoon trading after the Communist Party passed resolution to oppose nuclear deal with the U.S. The sharp division in the ruling coalition is likely to further complicate the workings of fragile coalition headed by the Congress Party. The specter of fresh election was on the minds of investors. Left parties, Congress, and BJP are at odds but neither prefers to return to general election. Asian markets rallied led by Japan and Hong Kong.

[R]8:30AM New York, 6:00PM Mumbai – Sharp division in ruling coalition roil market sentiment in the afternoon trading.[/R]

Politics came back to haunt stock market in the afternoon trading.

Sensex dropped 84.7 or 0.6% to close at 14,163.98 after adding nearly 300 points by the mid-day trading. Markets across Asia rose sharply led by the Bank of Japan to decision to leave the rates unchanged. In Mumbai trading traders worried that the coalition government may be heading for turbulent times. CNX Nifty dropped 38.20 or 0.9% to close at 4,114.95.

The news from the Central Committee of CPI – Marxist Party left investors nervous. The party passed resolution to oppose nuclear pact with the U.S. and warning to the government to face serious fallout if negotiations with the International Atomic Energy Agency and Nuclear Suppliers Group continued.

The press release published on the party’s web site said that “the Central Committee does not want the current crisis to affect the government. However, this is contingent upon the government not proceeding further with the agreement. The Central Committee, therefore, authorises the Polit Bureau to take whatever necessary measures to see that the agreement is not operationalised.” The press release also noted the majority in parliament is against this nuclear deal.

On a separate note in a response to the party position, Prakash Karat, General Secretary of the party said that the ‘’party does not share the views of the BJP on the matter, since their approach has been to bargain with the United States for a favorable nuclear adjustment while accepting the status of a subordinate ally of the US.”

Of the stocks traded on BSE, 1,749 declined, 943 gained and 67 were unchanged. Of the 30 stocks in the index, 15 gained and 15 declined. Daily turnover on BSE rose to 4,779 crore rupees from 4,404 crore rupees in previous session. On NSE, turnover increased to 11,491 crore rupees from 10,533 crore rupees a day ago.

Gainers

Cement stocks rallied on the news that Swiss company Holcim SA has picked up 3.9% additional stake Ambuja Cements at 154 rupees for a total price of $200 million. The news lifted the sector. Birla Corporation jumped 6.8% to 263 rupees, India Cements increased 3.9% to 218 rupees, ACC gained 2% to 972, and Ambuja Cement added 1.2% to 132 rupees.

ITD Cementation soared 15% 462 rupees after the news that the company parent was awarded order of 893 crore rupees from Delhi Metro Rail Corp.

ITC, cigarette maker, jumped 2.3% to 162 rupees on the news that the company is planning to set up convenience stores in rural locations and plans to increase the number of stores in the network to 200 by the end of fiscal year in March 2008. The current large format retail store Choupal Sagar will be expanded to from villages to small towns.

Bharti Airtel jumped 1.2% to 858 rupees on the news that it is planning a sale of its tower business. Earlier the company said that it plans to increase number of towers to 80,000 from 40,000 in the next twelve months.

Larsen & Toubro increased 0.9% to 2,405. The company won repeat business of $70 million from a shipbuilding company in the Netherlands.

Birla Kennametal jumped 4.6% to 255 rupees after the board approved the five for one stock split. The 10 rupees stock will be valued at 5 rupees after the division.

Real estate stocks increased on firmness in financial stocks. But banks lagged. Omaxe led the sector with a sharp rise of 10% to 301 rupees followed by 2.2% or 252 rupees increase in Ansal API.

Decliners

Grindwell Norton lost 4% to 142 rupees after company sold its stake in Lincoln Hellos for 100 crore rupees.

Reliance Energy and ONGC fell 2.2% in the market volatility. Banks faced selling on higher volume. State Bank of India lost 3.1% to 1,412 rupees followed by 2.5% decline in ICICI Bank to 826 rupees. HDFC Bank dropped 1.3% to 1,105 rupees.

[R]7:00AM New York, 8:00PM Tokyo-Japanese stocks jumped tracking stronger US and European stocks. Bank of Japan votes to keep key bank rate at 0.5%. Japan and New Zealand discuss oil-sharing agreement. Supermarket sales fall 3% in July. Isetan to buy Mitsukoshi Ltd for 295 billion yen.[/R]

Japanese shares climbed higher spurred by growing investor confidence at home and in the U.S. Nikkei 225 jumped 2.61% helped by gains in financials and industrial shares. Of the stocks in the index, 202 gained, 18 retreated while 5 remained unchanged. In the index, 28 stocks gained over 5% and 5 dropped over 1%.

In Tokyo trading Nikkei 225 firmed 2.61% or 415.68 to 16,316.32 helped higher by financials and industrials stocks that tracked gains in Europe and US. The Bank of Japan decided Thursday by a majority vote of 8 to 1 to keep its key bank rate 0.5%. BOJ Governor Toshihiko Fukui, however, said today the bank will keep an eye on rates so they don’t fall too low. The yen dropped sharply, as stocks rose. Against the dollar, yen closed at 7-day lows at 115.92 from as low as 112 last week.

Japan’s Ministry of Economy, Trade and Industry indicated Thursday it will expedite talks with New Zealand for a bilateral agreement on an oil-sharing program using their stockpiles. Under the deal, New Zealand would be allowed to acquire options from Japanese firms to ensure oil procurement in the event of emergencies.

Japanese supermarket sales fell 2.8% in July year-on-year, the Japan Chain Stores Association said Wednesday. Overall sales at 8,658 outlets run by 79 companies totaled 1,180,383 million yen. On a same store basis, food sales fell 0.9% and clothing sales declined 10.2%.

Of the Nikkei 225 stocks financials and industrials shares gained. Komatsu Ltd led gains rising 8% followed by Sojitz Corp up 7.64%. Fujitsu Ltd gained 7.58%, Sumitomo Metals rose 7.53% while Sumitomo Min pushed higher 7.4%. Financials surged. Mitsui Trust Holdings, Marubeni Corp, Mizuho Financial, Sumitomo Mitsui, Mitsubishi UFJ F gained over 4%. Printing and paper manufacturing shares fell. Sapporo Holdings led decliners shedding 2.77% followed by Tokyu Corp down 2.06%. Nippon Suisan and Nicherei Corp lost 1.9% and 1.32% respectively. Toto Ltd eased 1.24%.

Millea Holdings Inc said Wednesday it expects to book an appraisal loss of some 1 billion-yen on investment in financial products incorporating U.S. subprime mortgage loans. The company said, however, its exposure to the US mortgage loans was """"""""""""""""limited"""""""""""""""". Millea closed up 1.9%.

Departmental store, Isetan Co. will buy Mitsukoshi Ltd. for 295 billion yen by way of share allotment, the company announced Thursday. Mitsukoshi shareholders will receive 0.34 of a share in the combined company for each they already hold. Sales at the merged enterprise are forecast to rise to $14 billion annually. Isetan Co and Mitsukoshi Ltd shares closed higher 1.08% and 0.72% respectively.