Search Now

Recommendations

Monday, February 12, 2007

Value-buying offers some respite


The Sensex recovered some lost ground after plunging to a low of 14,182.34 on value-buying. At 12:36 IST the 30-shares BSE Sensex was down 247.39 points, to 14,291.55.

The BSE Sensex began on a highly bearish note, as selling pressure spilled over into this week. The horror show had started on Friday, when the benchmark Sensex tumbled close to 113 points, as a lot of stop losses were triggered due to highly leveraged positions in the derivatives market. Its high for the day is 14,529.28.

The market-breadth was quite weak. There were close to 10 losers for every single gainer on BSE. For 2,260 shares declining on BSE, only 272 rose. Just 15 shares were unchanged.

The BSE clocked a turnover of Rs 2077 crore.

All members of the Sensex pack were trading in the red.

Aluminium major Hindalco Industries plunged after its large all-cash acquisition of US-based Novelis raised concerns about a short-term strain on financials. It was down 12% to Rs 152.40 on high volumes of 43.81 lakh shares. Hindalco Industries and Novelis, on Sunday, signed a definitive agreement for Hindalco to acquire Novelis in an all-cash transaction, which values the US firm at approximately $6 billion, including approximately $2.4 billion of debt.

It may be worthwhile to recall a similar situation, when Tata Steel won the bid to acquire Corus, with analysts worrying about the high price paid by Tata Steel to acquire Corus. Novelis is the largest flat rolled products player in the world with a 19% share of the global market.

The Novelis-Hindalco deal will be financed through a recourse debt of $2.8 billion, Hindalco’s treasury contributing $450 million, while SL Iron Ore Mining, another group company, chipping in with $300 million as debt.

Following the transaction, Hindalco, along with Novelis, will be the world's largest aluminum rolling company, one of the biggest producers of primary aluminium in Asia, and India's leading copper producer.

Novelis posted a net loss of $102 million during the third quarter of 2006. The company has been plagued by high metal prices.

Reliance Communications dropped 3.87% to Rs 457.50 on 12.38 lakh shares, after it lost the bid to acquire the fourth largest cellular provider, Hutch Essar, with Vodafone emerging as a top bidder with its $19 billion bid.

ICICI Bank (down 3% to Rs 962), Tata Motors (down 3.20% to Rs 877), and L&T (down 3.38% to Rs 1658) were the other losers.

Index heavyweight Reliance Industries was trading at Rs 1,368, down 1.46% from the previous close of Rs 1,388.25 on a volume of 1.88 lakh shares.

Other heavyweight shares, Infosys (down 0.90% to Rs 2340.50) and HLL (down 0.44% to Rs 201.70) declined.

Zee Entertainment Enterprises (ZEE) dropped 27% to Rs 263.25 on 10.01 lakh shares after the stock went into a no-delivery period ahead of the de-merger of Dish TV, its direct-to-home TV service. The counter clocked 9.30 lakh shares on the BSE. The company has fixed 20 February 2007 as record date for determination of members of the company eligible for issuing shares by ASC Enterprises, which will be later renamed Dish TV. The company will allot '23 fully paid-up equity shares of Re 1 each in ASC to every shareholder for 10 equity shares of Re 1 each held in ZEE.

FIIs were net sellers to the tune of Rs 560 crore in index-based futures on 9 February, the day when the Sensex lost 113 points in a broad decline after a surge in inflation to a more than two-year high. Concerns of a further rise in interest rates grew after the inflation data was released last week. Net buying by FIIs stood at $153.7 million on 8 February 2007. Mutual funds net sale was Rs 193 crore (Rs 1.93 billion) on the same day. NSE F&O open interest was down by Rs 815 crore (Rs 8.15 billion) at Rs 60,052 crore (Rs 600.52 billion).

Hong Kong's Hang Seng fell 54.29 points (0.26%), at 20,623.37, Taiwan's Taiwan Weighted was down 83.17 points (1.06%), at 7,776.36, Singapore's Straits Times plunged 51.60 points (1.60%), at 3,169.29, while South Korea's Seoul Composite index was down 13.39 points (0.94%), to 1,414.29.

US stocks closed lower on Friday after an extensive sell off in stocks inspite of new upgrades announced by Ford Motor and General Motors. The sell-off was prompted by a rise in crude futures, remarks by Federal Reserve officials leaving open the possibility of more rate hikes and concern by Micron Technology executives about memory chip demand and pricing. The Dow Jones Industrial Average closed lower by 56.8 points at 12,580.83, and Nasdaq lost 28.85 points, to 2,459.82.

Oil prices climbed briefly above $60 a barrel on Friday for the first time since the first trading day of the year, as an unrelenting winter across the US led to beliefe that heating fuel demand will not wane anytime soon. Light, sweet crude for March delivery rose $0.18, to settle at $59.89 a barrel by afternoon trading on the New York Mercantile Exchange, after rising as high as $60.80.