Nifty Below 5700, CESC Tanks On Firstsource Acquisition

The first day of the Nov series witnessed extreme volatility, and both the Indian benchmarks closed down 0.7%. The 50-share Nifty index closed below 5700, while the BSE Sensex closed with a loss of 133 points at 18625.

Heavy volatility was also witnessed in the Asian and European indices. Hang Seng and Nikkei closed with over 1% losses. Shanghai closed with 1.7% intraday losses. Technology stocks were under pressure after Apple Inc’s Sept quarter earnings remained came in below expectations. Weak quarterly performance of China Unicom and Canon also prompted the heavy sell-off that brought the leading Asian indices down.

After showing a weak opening, the European markets have continued to remain volatile. FTSE and DAX are showing over 0.5% losses at this time, while CAC is down 0. 4%.

Among the sectors, only the Auto index remained up, primarily because the shares of the 3 large-caps, Hero MotoCorp, Bajaj and M&M, were up by over 1.5%. All the rest were trading in negatives. The CD index witnessed a huge sell-off as the index closed with 2.84% losses. Bajaj Electricals saw an 8% decline and Titan Industries tanked by more than 4% by closing. The FMCG, HC and Power indices saw a decline of over 1% today.

Of the Sensex stocks, M&M was the top gainer, up 2.57% after the company reported its quarterly earnings yesterday. Bajaj Auto and Hero Motocorp also gained over 1.6% on the positive sentiment and the guidance for the festive season. Both GAIL India and BHEL gained over 0.5%, while Sterlite, Tata Motors and HDFC Bank were flat in trades. The shares of HUL and ITC, on the other hand, were down over 2% each. Pharma stocks DRL and Cipla also dragged in today’s volatile market. India’s most valued company RIL was down 1% and IT stock Wipro was also down by a similar percentage.

Sun Pharma was down 1.38% by closing as the news of the company acquiring stake in Telenor changed the sentiment on the stock.

The shares of the country's largest power generator NTPC dropped 0.59% after the company reported its Q2 earnings. Its revenues increased by 5% to Rs 16119 crore and the net profit rose by 30% to Rs 3142 crore. The EBITDA margins also saw some improvement over the Sept 2011 numbers.

ICICI Bank also reported its earnings today. In the elapsed quarter, the bank beat the market expectations with a 30% rise in its net profit. The bank is expecting 20% expansion of loan book in this fiscal. Its shares, however, were down 0.7%.

HUL's scrip lost 2.14% despite a 17% reported rise in the firm's net profit. Its total income grew at a rate less than expected. Volume growth was also slower at 7%, which disappointed the markets.

Among other shares, Lupin dropped over profit booking. The shares of Wockhardt, which had risen to a new high on Tuesday (Oct 23), have also shed another 4% on profit booking.

Kolkata-based Power utility, CESC, has tanked 15% after it acquired a stake in Firstsource Solutions. The market largely believes that both the companies have no synergy between them, and Firstsource will eat into the cash flows of CESC in the future. CESC's management, on the other hand, believes that the power business does not promise a high growth rate going ahead, and hence, has gone for this acquisition.

The shares of Adani Enterprises were down 2.37% after the company reported a 42% fall in its net profit yesterday. Bajaj Electricals tanked 8% after reporting losses in its engineering and projects business in its quarterly results yesterday. Financial shares of Orient Bank of Commerce saw profit booking, due to which its shares dropped 1.8% today.

Despite a weak set of results yesterday, Fresenius Kabi closed with 11.87% gains as a total of 11 lakh shares exchanged hands in a bulk deal yesterday.

The advance-decline ratio on the BSE indicated a negative bias as the total declines were higher than the advances.

As for the earnings season, we see some improvement in the results, which indicates a little improvement in the business environment. Investors should start buying good stocks as the market is offering a good buying opportunity.

In the next week, the RBI will come out with its monetary policy review, when it will be clear as to whether or not it will cut the interest rates. Investors will be watching this event keenly.