Finance News

Bears strike hard and early...

Markets continued to trade in a lackluster manner during the closing hour of trade. The pessimism amongst market participants could be gauged from the fact that only one of the Nifty stocks closed in the positive. Selling pressure was not just restricted to frontline stocks but was also witnessed in mid and small caps.

The BSE Sensex closed at 12,530 (down 453 points) while the NSE Nifty closed at 3,641 (down 130 points). The rupee was trading at 44.24 to the dollar.

After the positive close during the previous two trading sessions, markets opened on a weaker note today on the back of negative global cues. Infact, the initial sell off was so huge that the Sensex had lost nearly 400 points inside the first trading hour. However, the selling pressure did not intensify much from thereon and the indices moved within a narrow range. The initial damage though was enough to send a chill down the spine of the market participants. Caution in the global markets can be gauged from the fact that all the major Asian markets closed below the breakeven and the European markets have also opened on a weaker note.

According to a leading business daily, UTI Bank (UTBK.BO, news) expects its loan portfolio to grow by 30% to 40% in FY08. After strengthening its core banking business, the bank will enter insurance and other financial services in a couple of years. It is also on an expansion drive overseas and will concentrate on the UK, Africa and Central Asia going forward. It is also planning to raise US$ 554 m during the year. This amount is part of the US$ 1 bn medium-term note (MTN) programme of the bank launched in the current financial year. It has already raised US$ 446 m under the MTN. The bank will utilise the proceeds to fund overseas expansion. The bank has recorded 60% growth in loans till December 2006. The management expects the credit growth in FY08 to be robust despite a slowdown expected in the banking industry. The plans of the bank are well in line with its long-term strategy of being a strong player in the banking arena. The stock closed lower (down 3%) along with its peers ICICI Bank (ICBK.BO, news) (6%) and HDFC Bank (HDBK.BO, news) (2%).

Biocon's subsidiary Syngene has entered into a research partnership with global pharma major Bristol-Myers Squibb. It would leverage this symbiotic global partnership to provide research and development (R&D) services for discovery and early drug development. Under the terms of the agreement, Syngene will partner with Bristol-Myers Squibb through a dedicated research facility at Biocon Park in Bangalore. This would house more than 400 scientists to help advance Bristol-Myers Squibb's discovery and early drug development. Bristol-Myers Squibb will significantly increase the scope of its existing relationship with Biocon's Syngene to further develop integrated capabilities in India in medicinal chemistry, biology, drug metabolism, and pharmaceutical development. The new research facility will mark a significant step forward in Biocon's evolution as a valuable partner to the global pharmaceutical industry. The stock along with its peer Panacea Biotech closed firm (both up 1%).

Software stocks closed weak with Wipro (down 5%), Infosys and TCS ( both down 4%)amongst the key losers. Tech Mahindra is all set to bag a US$ 250 m order from an European telecom company. The contract is spread over a two-year period and this along with the US$ 1 bn BT contract and US$ 400 m AT&T win, will take Tech Mahindra into the big league in FY08. The BT project is expected to start from next month and it will take about 18 months for the project to add to the bottomline of the company due to huge investment in the initial months. The AT&T deal will fetch the company about US$ 70 m in revenues in FY08. Since the deal will be finalised towards the end of the year, the impact on revenues will be felt only in the next year. Tech Mahindra is also focusing in a big way on the BPO business. The company has already invested Rs 500 m in infrastructure, technology and manpower for this business and expects its contribution go up to 10% of overall revenues by the next year. The stock of Tech Mahindra also closed weak down 4%.