The broader markets went through a volatile day's trade with the indices charting a pattern of steep cliffs alternating with deep gorges. Software and banking heavyweights aided the indices, while cement and construction majors faced the brunt of the selling activity. As regards global markets, while the Asian indices closed in the green, the European indices are witnessing a positive trend currently.
The BSE Sensex closed at 16,861 (up 124 points) while the NSE Nifty closed at 5,013 (up 30 points). The rupee was trading at 41.92 to the dollar.
The markets had a volatile day today. Having opened below the dotted line, they alternated between sharp declines and jagged upward movements to finally close in the green. Both the BSE midcap index as well as the BSE smallcap index ended higher by 1%. The overall market breadth was positive with gainers outnumbering losers by a ratio of 5:4 on the broader BSE. Ranbaxy (up 5%) and Reliance Infrastructure (up 4%) led the pack of gainers, while Grasim (down 4%) and Jaiprakash Associates (down 2%) led the pack of losers.
Ranbaxy and Merck have signed a strategic agreement providing for drug discovery and clinical development collaboration for new anti-infective products. The companies will work together to develop clinically validated anti-bacterial and anti-fungal drug candidates. Ranbaxy will carryout drug discovery and clinical development through Phase IIa clinical trials, with Merck conducting development and commercialization of drug candidates thereafter. The 5-year collaboration shall begin this year and can be extended later. The milestone payments received will total to more than US$ 100 m associated with the achievement of milestones in each target included in the agreement. It must be noted that given Ranbaxy's move to hive off its R&D unit into a separate listed entity, the benefits from this deal will not accrue to it. Ranbaxy closed 5% higher, while Dr. Reddy's ended higher by 1%.
As per a leading business daily, the government has asked oil companies to raise prices of branded petrol and diesel substantially and introduce premium cooking gas without subsidies. It may be noted that the prices of branded fuels are not regulated by the government and currently attract a premium of around Rs 3 per litre more than the normal petrol and diesel. Branded petrol refers to 'Power' (HPCL), 'Speed' (BPCL) and 'ExtraPremium (Indian Oil), while branded diesel refers to 'Turbojet' (HPCL), 'Hi-Speed Diesel' (BPCL) and 'ExtraMile' (Indian Oil). This is a positive development for the oil companies, who are suffering from record under recoveries this fiscal. Indian Oil (down 6%), BPCL (down 4%) and HPCL (down 3%) ended in the red.
1:00 pm
Signs of recovery?
After a strong bout of selling activity that led the markets to plunge into the red in the early hours of trade, the indices have managed some recovery post noon. The jitters were largely on the back of reports of lower industrial growth of 3% for the month of March 2008 (14% in March 2007). Currently, stocks across sectors are witnessing selling pressure while select software, energy, and pharma stocks are trading firm. The decline to advance ratio is poised at 3.9 to 1 on the BSE.
The BSE Sensex is trading at 16,693 (down 44 points) while the NSE Nifty is trading at 4,938 (down 44 points). The rupee was trading at 41.68 to the dollar.
Shipping stocks are currently trading weak led by Mercator Lines (5%), Bharti Shipyard (3%) and Aban Offshore (2%). As per a leading business daily, India's largest offshore service provider, Great Offshore (GOL), is set to acquire Cayman Islands based, Sea Dragon Offshore, for a sum of US$ 1.4 bn. GOL is said to have faced competition for the acquisition from other firms including domestic shipping companies like Mercator Lines and Essar Shipping. The acquisition is expected to benefit the company (GOL) by enabling it to get access to rigs that can be used to make ultra deep-water discoveries. The stock of GOL is, however, currently trading lower (2%).
Telecom stocks are currently witnessing selling pressures led by MTNL (2%), Reliance Communications, Bharti Airtel and Tata Comm (each down 1%). As per a leading business daily, Reliance Communications (RCOM) has entered into a joint venture (JV) with Alcatel-Lucent, a global infrastructure provider, to offer managed network services (MNS) to the Indian telecom industry. An MNS provider installs the infrastructure and equipment and manages it for the telecom companies. The new entity will initially carry out services for RCOM's CDMA and GSM networks. The JV will begin with a focus on providing services to 12 circles in the north and western regions of India. The new entity also intends to help RCOM with its expansion plans and foray into the international markets along with allowing the company to focus on its services capabilities while leaving the infrastructure aspects for Alcatel-Lucent to handle.
11:00 am
Red carpet opening...
Taking cues from the global markets and amidst rising worries about inflation, the Indian markets too have opened deep in the red. The overall market breadth is negative with losers outnumbering gainers by a ratio of 8.2 to 1 on the NSE. Commodity, banking, power and energy stocks are trading lower, while select software, pharma, FMCG and auto stocks are witnessing sporadic buying activity.
The BSE Sensex is trading at 16,588 (down 149 points) while the NSE Nifty is trading at 4,932 (down 50 points). The rupee was trading at 41.68 to the dollar.
As per a leading business daily, Reliance Industries is planning to convert its fuel retail outlets, which were recently closed owing to unviable operations, into malls and multiplexes. The company has outlined an investment of almost Rs 50 bn to develop 700 to 800 properties at important places, some of which will be bought out from fuel dealers. The company has also recently struck a deal with Marks and Spencer (M&S) and the current plans seem to be in line with the deal signed with the UK retailer major, which plans to open 50 retail stores in India. The stock is trading lower by 1%.
In the US markets last Friday, stocks dipped as crude and gas prices marked new highs amidst exacerbated fears about inflation. This coupled with weak quarterly earnings report of some of the index heavyweights further led to pessimism among participants. All the three indices, the Dow Jones, S&P 500 (each down 1%) and the tech laden Nasdaq (marginally lower), closed in the red. The crude oil prices settled at a new record of US$ 125.9 a barrel, while gold prices rose by US$ 3.7 an ounce to settle at US$ 885.8 an ounce. As regards global markets, the European markets ended in the red, while the Asian indices are witnessing a mixed trend.
Pre-Open
Market worries, business hopes & more
What’s worrying the markets?
There’s no stopping the spectre of rising inflation as it continues to cast its spell on Indian stock markets. Rising prices of fuel and food and now a sharp depreciation in the currency has led to enhanced fears regarding inflation touching even higher levels. And even then, it is important to note, the inflation figures (measured by wholesale and consumer price indices) outlined by the RBI and other statistical organisations remain understated, for facts like the rising crude prices that have not been passed on to the consumers by way of higher prices for petrol, diesel and kerosene.
In this scenario, stocks from the oil and gas and rate sensitive sectors have been particularly hit. Pressure on stocks of companies that require high levels of capital investment is also showing no signs of abating. And then there is the fear of the economy slowing down on the back of high interest rates that have curbed money demand, both for consumption and investment. Without trying to sound overtly unnerved about these issues that dog sentiments, we believe that the pain is here to stay for the short to medium term.
Oil’s boiling over
As experts at Goldman Sachs, the US investment banker, discuss the ‘super spike’ that crude prices can take en route to the US$ 200 per barrel mark over the next 6 to 24 months, the commodity is showing no signs of costing any lesser than its current highs. Factors that have kept oil at the current high levels (of nearly US$ 120 per barrel) include – continued strong demand from guzzlers like India and China, supply side issues from oil’s largest producers, and of course, the US Federal Reserve induced dollar hammering that has led to speculative buying in crude and other commodities.
To make things simpler, since most of the world commodities are traded in US dollar terms, depreciation of the greenback makes its cheaper to buy these commodities, even when the users are finding it difficult to bear the ‘rising’ prices. Not only crude, you name a key commodity and it has witnessed a sharp spike in prices over the past few months – steel, copper and aluminium to name a few.
Taking the India model abroad
The news concerning Indian telecom major, Bharti acquiring a major stake in its South African counterpart, MTN, is heating up. The fact that the Indian company is aiming to replicate its low cost model across other geographies with similar income levels as India, is a rationale that carries much weight. As a matter of fact, India is adding 3 mobile subscribers every second. This is up from 1.5 four years back.
Unlike most of the consumption stories doing rounds in India and which show huge potential in the untapped rural markets, home to two-thirds of the country’s one billion-plus population, the increasing penetration of mobile telecom services is being acted out in reality. In rural India, carrying a US$ 20 mobile phone can be something of a status symbol. This is clearly indicative of the much-larger drama unfolding in the Indian telecom market, once considered a backwater and now the fastest growing in the world.
