Deals Dominate Sensex Trading

123jump.com Staff
17 Sep, 2007
New York City

Stocks in Mumbai, India declined in the afternoon but merger and financing activities continued at brisk pace in one of the fastest growing economies in the world. Rajesh Exports plans to sell 51% stake in the company to De Beers or U.S. based private equity group. Tata Sons to buyback stake in Tata Investments. IFCI receives bids from GE and Wilbur Ross led fund for 26% stake. Ispat Industries and Adani Enterprises each to invest nearly $2.5 billion in their respecitve businesses.

[R]10:00AM New York - 7:30PM Mumbai – Foreign direct investment continues to flow via stock market into privately owned companies.[/R]

Sensex in Mumbai trading declined 99.37 or 0.65% to close at 15,504.43. CNX Nifty lost 0.52% or 23.35 to close at 4,494.65. Sensex opened higher and added more than 100 points at mid-day but fell sharply in the last hour of trading ahead of the interest rate decision in the U.S.

Of the stocks trading on BSE, 1,362 declined, 1,355 gained, and 66 closed unchanged. Daily turnover on the exchange declined to 4,661 crore rupees ($1.0 billion) compared to 6,506 crore rupees in Friday’s trading. In trading on National Stock Exchange volume declined to 9,395 crore rupees ($2.2 billion) from 12,509 crore rupees a day ago.

Of the 30 stocks in the Sensex 14 rose and 16 fell. Housing Development Finance Corporation led the decliners with a loss of 3.3% to 2,143 rupees.

Rajesh Exports soared 7% to 779 rupees on the news that De Beers and private equity group in the U.S. is bidding for 51% stake in the company.

Reliance Energy jumped 2.7% to 906 rupees on 13.4 lakh stocks. Last week the Supreme Court of India permitted company to bid for the Mumbai Sea Link project. Reliance Industries fell 0.6% to 2,058 rupees on 3.6 lakhs shares trading.

Tata Investment Corporation soared 20% to 540 rupees. Largest stockholder Tata Sons offered to buy 29% of stocks held by public at 33% premium or 600 rupees. Tata Sons and other Tata group companies control 61% of the stocks in the company. Infrastructure Finance known as IFCI has received bid for its 26% stake from General Electric Capital Corp and a private eqity group led by private equity fund operator Wilbur Ross in the U.S. Ross is known for its short term investment in company trading at deep discount.

Indowind Energy surged 16% to 132 rupees after the news that last week, Citigroup Global Markets Mauritius has bought 5,00,000 shares at 90 rupees. CCL Products surged 7% to 296 rupees after the news that Reliance Mutual Fund purchased 9,00,000 shares at 250 rupees. United Phosphorous gained 1.5% to 358 rupees after the company plans to issue 3.11 crore warrants (or 30 million) to founders of the company. United Spirits surged 8% to 1,840 rupees after the company acquired for $3 million U.S. based liquor distributor Liquidity Inc.

Automobile stocks jumped on holiday sales expectations. Tata Motors gained 1.6% to 705 rupees, Maruti Udyog increased 1.1% to 875 rupees, and Bajaj Auto added 0.65% to 2,392 rupees. Hindustan Motors soared 20% to 36.30 rupees.

Ispat industries surged 9.7% to 21.95 rupees. On Friday the stock added 5.2% after the company said that it plans to invest 10,000 crore rupees or $2.5 billion in the next five years. Adani Enterprises gained 4.8% to 411 rupees on the news that the company is planning to invest $2.5 billion to build 2,640 MW coal fired power plant in Amdavad, Gujarat. McNally Bharat Engineering rose 2.9% to 196 rupees on the news that it has won 258 crore rupees order from Steel authority of India for a steel plant in Burnpur.

[R]8:00AM New York, 12:00PM London – Stocks in New York are likely to open sharply lower. European stocks are falling at mid-day trading. Asian markets closed lower.[/R]

Market indexes in New York are expected to open lower ahead of the Fed meeting tomorrow. Index futures are pointing at least 0.5% decline in Dow, S&P 500, and Nasdaq indexes. Former Chairman of the Federal Reserve said on televised interview that the economic outlook for the U.S. economy is ‘gloomy’.

In the overnight trading in Asia markets fell. Singapore led the region with a loss of 1.7% followed by losses in Taiwan of 1.5%, 1.2% declines in Hong Kong and Thailand. India fell 0.6%, Australia edged 0.5% lower. Shanghai led the few rising markets in the region with a gain of 1.9%. Japan was closed for a holiday.

In Hong Kong property stocks fell. Sun Hung Kai fell 4.5%, Hang Lung Properties declined 5.4%, and Cheung Kong plunged 6% after investors sold stocks in the sector ahead of rate decision from the U.S. Fed.

Samsung Electronics dropped 2% after it received investigation notices from the U.S. Department of Justice for the alleged price fixing in the flash memory market. Toshiba in Japan and SanDisk in the U.S. were other companies implicated in the price-fixing schemes.

Australian market fell after BHP Billiton declined more than 1.5%. Macquarie Bank declined 2.5% and National Australian Bank declined 1.5%. Local press reports suggested that NAB may be interested in acquiring troubled UK lender Northern Rock.

European markets at mid-day trading are trading sharply lower dragged by banking stocks. Spain led the decliners with a loss of 1.7% followed by declines of 1.5% in France, 1.4% in UK, and 1.2% in Italy. Top nine markets in the region fell.

Northern Rock fell more than 35% at mid-day as depositors continue to pull money from the bank. The depositors have pulled $2 billion from the bank according to BBC report Merrill Lynch lowered its earnings estimate by half for the lender and stated the company likely to be acquired in the near future. The independent lender, the fifth-largest in the UK, is sough emergency lending last week from the Bank of England. The BoE lent 4.4 billion pounds and urged to the general public that the bank’s operational difficulties are temporary. However, depositors ignored the BoE and lined up to withdraw the money.

The largest rescue of a bank in the UK has depressed stocks of mortgage lenders. The UK bank deposits of 31,700 pounds are secured by the Bank of England. Investors with larger depositors were worried and quickly decided to withdraw money.

Northern Rock had relied for 63% of its funding needs from the volatile capital markets. The other banks fund their mortgage lending operation from its deposit base and other long term debt obligations. The short term nature of funding from the capital markets and market volatility has put several lenders in the U.S. and UK on the edge. Bank stocks have dropped 14% for the year but mortgage lenders have fallen sharply in the wake of the U.S. subprime mortgage crisis. Bradford & Bingley and Alliance Leicester the other two large UK lenders have declined more than 12% in London trading at mid-day.

UK households now carry 1.3 trillion pounds in debt and UK with a rate of 5.75% has the highest interest rate among group of seven wealthiest nations