Tuesday August 7, 03:30 PM
Profit booking takes toll... |
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By Equitymaster.com
Selling pressure intensified in the index heavyweights in the final trading hour causing the indices to close barely above the dotted line. While power and software stocks garnered the interest of the investors, stocks from the FMCG and metals sectors were at the receiving end. As regards the global markets, while the Asian indices closed a mixed bag, the European indices are trading higher currently.
The BSE Sensex closed at 14,933 (up 30 points) while the NSE Nifty closed at 4,356 (up 16 points). The rupee was trading at 40.40 to the dollar.
Global markets once again wielded influence over the Indian markets as firm cues from the former led the Indian bourses to trade into the positive throughout the session today. The opening was on a firm note and the indices held on to those gains for the larger part of the day. However, the penultimate trading hour saw investors opting to take some profits off the table causing the indices to shed some gains. The selling pressure intensified in the final trading hour with the indices managing to close marginally above breakeven. The market breadth was positive with gainers outnumbering losers by a ratio of 3.3 to 1 on the BSE Sensex. While Reliance Energy (up 3%) and Bharti Airtel (2%) led the pack of gainers on the Sensex today, ITC (down 3%) and ICICI Bank (ICBK.BO, news) (2%) succumbed to selling pressure.
Software major, Wipro (WIPRd.BO, news) has signed a definitive agreement to acquire the Nasdaq-listed Infocrossing for US$ 18.7 per share, pegging the enterprise valuation of the IT infrastructure management services firm at US$ 600 m. This is Wipro's twelfth acquisition in the IT space and the ninth in the past 24 months alone.
The entire acquisition process is likely to close by December 2007 and the acquired entity will be merged with Wipro's subsidiary in the US - Wipro Inc.
Infocrossing earned revenues of US$ 232 m in 2006 and has 900 employees. Infocrossing has 190 clients with 95% repeat business. However, the operating margins of Infocrossing are in the range of 10% and 14%, which are lower than Wipro's margins of around 25%. However, the management expects to mitigate the margin difference in the next three years due to synergies. The current global IT infrastructure market is estimated to be around US$ 150 bn of which US$ 70 bn is offshore. This acquisition is a perfect fit for Wipro's technology infrastructure services (TOS) and gives it a leadership position in remote infrastructure management services. The stock, along with its peers Infosys and TCS, closed marginally higher.
Banking stocks closed a mixed bag. While IDBI (up 5%), Bank of Baroda (3%) and HDFC Bank (HDBK.BO, news) (1%) found favour, ICICI Bank (down 2%) closed into the red. ICICI Bank has raised yen-denominated loans equivalent to US$ 1.5 bn from 10 foreign banks. The syndicated loan was raised in three tranches of US$ 500 m each with tenures ranging from one to three years. The one-year loan was raised at 27 basis points over the London interbank offer rate (Libor) for yen, two-year loan at 44 basis points over Libor and three-year loan at 65 basis points over Libor. ICICI Bank plans to complete the loan syndication by September 2007. The bank has opted for yen borrowing to save on withholding tax on interest payments because Japan has the lowest interest rate among major economies. ICICI Bank plans to complete the loan syndication by the first week of September. The bank had raised Euro 500 m in March 2007, which was sufficient to meet the Basel II norms and funding its own growth. The current loans would be used to invest in its subsidiaries.
Aluminium stocks closed weak today and the key losers here were Nalco (down 1%) and Hindalco (down marginally). Nalco, the largest alumina and second largest aluminium producer in India, proposes to make a foray into wind power generation. The company is in talks with the Orissa Renewable Energy Development (ORED) and Suzlon Energy to set up a wind power plant near its alumina refinery in Orissa. The company proposes to set up the windmills on the Panchpatmali Hills near Damanjodi, where it currently mines bauxite. The proposed wind power project can meet the electricity requirement of the refinery in part or full and thus reduce dependence on thermal power to an extent while giving it access to a clean source of energy. In July this year, the company had to shut down two out of its seven 120 MW units due to shortage of coal. All this has forced the company to import power from the grid (Gridco) to keep its smelter plant running, which has scaled up the operating costs. The move will help Nalco curtail costs and ensure smooth functioning of its facilities.
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