Friday, October 14, 2005

Sensex plummets to one-month low

A sell-off gripped the bourses for the second day in a row today. Dismal Q2
results by cement major ACC triggered a sharp fall in the latter part of the
trading session. Cement scrips declined sharply. Construction stocks
witnessed a major battering.

BSE Sensex plunged 175.17 points or 2% to settle at 8,201.73 – the lowest
level in the last one month since 14 September 2005. The S&P CNX Nifty lost
52.90 points or 2% to 2,484.40.

A host of blue chips moved lower. A number of small-cap and mid-cap stocks
lost ground, with some stocks being badly hurt. BSE Small-Cap Index plunged
159.91 points or 2.8% to 5,419.27. BSE Mid-Cap Index lost 91.49 points or
2.2% to 4,021.52.

Market breadth was quite weak. Losers outpaced gainers by a ratio of 7.8:1.

In a weak market, UTI Bank edged higher on the back of strong Q2 results.
Battered steel major Tisco edged higher on bargain hunting. Cipla recovered
from the lower level.

Turnover was higher on BSE at Rs 2,997 crore compared to Thursday’s Rs 2,883

ACC’s dismal Q2 results came at a time when the domestic bourses had come
sharply off the higher level in the past few days on the back of selling by
FIIs. The Sensex plunged 164 points on Thursday (13 October 2005). From a
lifetime closing high of 8,799.96 on 4 October 2005, Sensex has now lost
598.23 points or 6.7% to current 8,201.73.

The latest data showed that FIIs sold shares worth a net Rs 399.60 crore on
Thursday (13 October 2005) – the day when Sensex plunged 164 points. By the
first few days of October 2005, FIIs have sold shares worth a net Rs
1,000.70 crore (till 13 October 2005). Higher US rates tend to lure capital
away from high-yielding but relatively risky emerging markets. The Fed has
hiked interest rates 11 times since June 2004 to the current 3.75 percent
and more increases are expected.

ACC plunged 5.7% to Rs 439.50 hit by dismal Q2 results that hit the market
in the latter part of trading today. The stock declined on high volume of
17.6 lakh shares.

Even as ACC’s sales rose 13.5% to Rs 1,004.95 crore from Rs 885.28 crore in
Q2 September 2004, the operating profit declined 6.5% to Rs 140.05 crore
from Rs 149.88 crore in Q2 September 2004. Thus, higher cement prices were
not enough to combat rising costs. The core operating profit margin (OPM)
declined sharply to 13.93% from 16.9% in Q2 September 2004.

Net profit jumped 159% to Rs 203.43 crore boosted by a huge extraordinary
profit of Rs 172.80 crore from the sale of the refractory business.

ACC’s dismal Q2 results hit a host of other cement stocks. Gujarat Ambuja
Cements plunged 6% to Rs 68, India Cements shed 5.3% to Rs 94.70, Madras
Cement lost 4.7% to Rs 1,415, Mangalam Cement lost 4.6% to Rs 72.35, Birla
Corporation lost 4.3% to Rs 223.20, Ultra-Tech Cement lost nearly 3% to Rs
425 and Grasim shed 1% to Rs 1,216.80.

Construction scrips were on lower turf. IVRCL Infrastructures (down 9% to Rs
715), Nagarjuna Construction (down 6% to Rs 207.95), L&T (down 4.3% to Rs
1,410), Hindustan Construction (down 3.4% to Rs 944) and Gammon India (down
2.8% to Rs 348) all declined.

Car major Maruti Udyog slumped nearly 5% to Rs 530.30, extending the recent
fall in the counter.

Profit taking pulled Bharti Tele-Ventures lower. The stock dropped 4.7% to
Rs 327.20. 4.72 lakh shares changed hands in the counter on BSE.

ICICI Bank fell nearly 4% to Rs 504.90. 10.9 lakh shares were traded in the
counter on BSE. ICICI Bank’s net profit has grown 31% in Q2 September 2005
to Rs 580 crore from Rs 442 crore in Q2 September 2004. Net interest income
improved 39% to Rs 953 crore.

ICICI Bank has also announced a major fund raising programme. The bank will
mop up Rs 7,000 crore ($ 1.6 billion) from a public issue and ADR issue with
a further greenshoe option of 15%.

But UTI Bank bucked the weak market trend on the back robust Q2 results. The
stock gained 2.2% to Rs 259.70. 3.8 lakh shares changed hands in the counter
on BSE. UTI Bank’s net profit has jumped 135.8% to Rs 109 crore in Q2
September 2005 from Rs 46.22 crore in Q2 September 2004. The gross interest
income has risen 53% to Rs 687.60 crore from Rs 449.30 crore

Ranbaxy dropped for the second day in a row after a ruling by the UK High
Court on Wednesday which dismissed Ranbaxy’s legal challenge to the main
patent protecting Pfizer’s Lipitor. The stock shed 3.8% to Rs 441.

Oil exploration major ONGC lost 3.5% to Rs 993, Bhel shed 3.4% to Rs 1,135,
HDFC Bank lost 3.3% to Rs 655, Hindalco shed 3.2% to Rs 132.50, Bajaj Auto
shed 3% to Rs 1,690, ITC lost 2.5% to Rs 125.10 and Satyam Computer lost
2.4% to Rs 572.

Index heavyweight Reliance Industries (RIL) lost 1.7% to Rs 761.60 and IT
bellwether Infosys shed 0.4% to Rs 2,612.

Steel major Tisco gained 0.5% to Rs 378.55. 29.5 lakh shares changed hands
in the counter on BSE.

Tata Sponge plunged 9.4% to Rs 151.10 after it reported sharp fall in Q2
September 2005 net profit. Tata Sponge Iron’s net profit has declined
sharply by 48.7% to Rs 5.54 crore in Q2 September 2005 from Rs 10.81 crore
in Q2 September 2004. Net sales rose 4.1% to Rs 52.19 crore from Rs 50.12

Gateway Distriparks (GDL) recovered from lower level after it unveiled Q2
results in mid-afternoon trade. The stock ended flat at Rs 214.05 – off the
day’s low of Rs 204. 4.9 lakh shares changed hands in the counter on BSE.
GDL reported net profit of Rs 20.52 crore on net sales of Rs 35.14 crore for
Q2 September 2005. Comparable figures for the year-ago period were not

Crompton Greaves lost 3.3% to Rs 617 ahead of the announcement of Q2 results
later in the day. Market men expect strong Q2 results from Crompton Greaves.

Mastek staged a solid rebound after Thursday’s post-results fall. The stock
jumped 5.4% to Rs 497.85.
source: capitalmarket

Infosys holds fort

Software major Infosys recovered from Thursday’s fall on the back of strong
Q2 results.

The stock was up 0.2% to Rs 2,629.70. It was quite range bound today. It
moved between a low of Rs 2,606 and a high of Rs 2,644. 2.4 lakh shares
changed hands in the counter on BSE.

The scrip lost 2.2% on Thursday (13 October 2005) in a weak market to Rs
2,624.15. On Tuesday (11 October 2005), the stock gained 2.3% to a 52-week
closing high of Rs 2,683.90 boosted by strong Q2 results.

Over the past one-and-a-half months, the stock moved strong. From a low of
Rs 2,267.70 on 24 August 2005, it leaped up 15.7% to Rs 2,624.15 by 13
October 2005. A major order win from Dutch bank AMBN AMRO boosted the stock
in late August-early September 2005.

On a sequential basis, Infosys’ consolidated net profit rose 13.9% to Rs 606
crore from Rs 531.92 crore in Q1 June 2005. Consolidated sales rose 10.7% on
a sequential basis to Rs 2,294 crore from Rs 2,071.59 crore in Q1 June 2005.

For the second time this year, Infosys has revised upwards both earnings and
revenue guidance for FY 2006 (year ending 31 March 2006). Infosys expects an
EPS (before exceptional items) of between Rs 89 and Rs 89.40 for FY 2006, a
growth of 29.38% to 29.96%. While declaring Q1 June 2005 results, Infosys
had pegged FY 2006 EPS at between Rs 84.70 and Rs 86.00 – a growth of 23.12%
to 25.02%.

Infosys expects a revenue of between Rs 9361 crore and Rs 9383 crore for FY
2006 – a growth of 31.30% to 31.61%. At the time of announcing Q1 June 2005
results, Infosys had pegged FY 2006 revenue at between Rs 8,947 crore and Rs
9,051 crore – a growth of 25.49%-26.95%

The pricing environment is stable with an upward bias, Infosys said at the
time of announcing Q2 results. The rupee has depreciated during the quarter
creating a more benign margin environment, it said.

Infosys recruited 8,026 employees (gross addition) in Q2 September 2005
which is the highest ever addition during any quarter.

Ranbaxy Laboratories loses further ground

Ranbaxy Laboratories lost 3.4% to Rs 442.50, extending Thursday’s sharp

7.8 lakhs shares changed hands in the counter on BSE.

The stock plunged 6% on Thursday to Rs 458.40 on huge volume of 31.5 lakh
shares after a ruling by the UK High Court on Wednesday which dismissed
Ranbaxy’s legal challenge to the main patent protecting Pfizer’s Lipitor.

The stock had seen high volatility ahead of the key ruling. It lost nearly
7% in just two trading sessions ahead of the announcement to Rs 489.15 on 11
October 2005 from Rs 525.55 on 7 October 2005. Earlier, the stock had gained
6.9% to Rs 525.55 on 7 October 2005 from a recent low of Rs 491.25 on 30
September 2005.

What is more important for Ranbaxy now is what ruling may manifest in the US
court against Pfizer's patents. Ranbaxy has challenged Pfizer’s patents on
Lipitor in the US as well.

Meanwhile, Ranbaxy along with Agvar Chemicals Inc has filed a joint
complaint against Barr Laboratories, Inc. and Teva Pharmaceuticals, USA Inc.
for damages and equitable relief for breach of contract, fraud and tortuous
interference associated with the supply of Active Pharmaceutical Ingredients
(API) regarding the commercialisation of fexofenadine hydrochloride tablets
in the US healthcare market.

Expectation of strong Q2 results spur Crompton Greaves

Crompton Greaves bucked the weak market trend and rose slightly on
expectation of strong Q2 results.

The stock was up 0.7% to Rs 643 in early afternoon trade. 64,357 shares
changed hands in the counter on BSE.

The stock bounced back from the lower level since late September 2005 albeit
in highly volatile trade due to alternate bouts of buying and selling. From
a low of Rs 579.50 on 22 September 2005, the stock surged 10% to Rs 638.55
by 13 October 2005 on the eve of the results announcement. The company
unveils Q2 results today.

According to one domestic brokerage, Crompton Greaves’ revenues are expected
to grow a robust 38% in Q2 September 2005 driven by the power and industrial
division. Fuelled by the spurt in investment in power T&D, the revenues of
the power segment are expected to grow 40% and the revenue of the industrial
segment is expected to grow 22% thanks to the buoyancy in the manufacturing
sector, says a report. The brokerage expects a 68% jump in the company’s
earnings in Q2 September 2005.

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