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Strong global cues lift market in volatile trade on Thursday
The market trimmed off early losses to ride high in the late trading session. It ended the day with a large gain. The BSE Sensex ended at 17,559, up 0.67% or 107 points, and the Nifty closed at 5,260, up 0.62%. The market hit the intraday low in the morning session and was in a narrow range for most of the day. It rallied strongly in the mid-afternoon session, taking a cue from the European market, which opened higher.
The Asian market was mixed. The key benchmark indices in China and Hong Kong fell by 1.15% to 1.23%. However, the indices in Indonesia, Japan, Taiwan, Singapore and South Korea rose by 0.1% to 0.46%.
US stocks ended lower on Wednesday, snapping a two-day winning streak after Fitch cut its rating on Portugal. The Dow Jones fell 52.68 points to 10,836. The Nasdaq declined 16.48 points to 2,398 and the S&P 500 fell 6.45 points.
Closer home, the government said that the food price index rose 13.22% in the year to 13 March 2010, which is lower than the annual rise in the last week. The fuel price index rose 12.68% and the wholesale price index rose 9.89%. The RBI said yesterday that the demand-side pressure could build up again on account of the economic recovery. The central bank’s comment is significant, indicating the possibility of another round of rate rise after it raised the repo and reverse repo rate last Friday.
On Tuesday, foreign intuitional buyers were net buyers with a net purchase of Rs359.75 crore. Domestic institutional investors were net sellers again (Rs73.4 crore).
During the day, European stocks rallied after Germany backed a Greek rescue proposal. European Union leaders will meet today to discuss the debt crisis of Greece. Fears that EU members may fail to agree to an aid package for Greece pushed the euro to a fresh 10-month low against the dollar in Asia. There was good news from the Emirates as the government planned to give $9.5 billion to restructure the debt of Dubai World.
In the US, new-home sales fell around 2% to 308,000, the lowest on record in February. Mortgage applications fell for a second week last week as interest rates crept higher. Orders for durable goods rose 0.5% in February as inventories increased by the most since December 2008. The US Federal Reserve Board however said that the interest rate will not be raised now as the employment rate is at a low level and inflation is under control.
There was strong buying in Bharti Airtel (up 2.27%) today after Kuwaiti telecom company Zain decided to sell most of its African assets to Bharti Airtel for $9 billion. Tech Mahindra was down 1.75% on the news that the American telecom major AT&T Inc has bought an 8.07% stake in the IT services firm for $34.5 million (approximately Rs160 crore). Piramal Healthcare was up 1.39% after the company entered into an agreement with Cipla (up 2%) to sell contraceptive pills. Auto companies are planning to raise the car price by 1%-3% from 1 April 2010 on account of rising input costs. Godrej Consumer Products (up 1.22%) plans to expand in Africa in FY10-11. Tata Motors was down 1.87% on concerns over rising raw material costs, although the company said that it plans to sell 39,205 trucks and buses this month. Larsen & Toubro (up 1.78%) has received six orders worth of Rs1,181 crore for the construction of power transmission lines and substation works. While three of the six orders are from the Gulf market, the other three have been secured in India.
The market is likely to close up another week, which means that chances of a correction are looming large. However, cheap money is flowing into risky assets around the world and may surprise us by taking this rally further.
Gammon Infra is likely to finalise signing of both the immediate 24% and the subsequent 26% stake-purchase deals in Indira Container Terminal from Spain-based Dragados in April
Gammon Infrastructure Projects Ltd (GIPL)—which currently holds 50% stake in Indira Container Terminal Pvt Ltd (ICTPL)—will be finalising the signing formalities by April for an additional 24% stake purchase in this terminal company, and the planned (subsequent) 26% stake purchase.
“The sign-off ceremonies for both the transactions should happen by next month,” said Parvez Umrigar, managing director, GIPL. “It is our partner’s desire to sign out on both the transactions together, so (that) they can be assured of a complete exit and not a halfway one,” added Mr Umrigar.
ICTPL is the special purpose vehicle (SPV) which is developing the offshore container terminal at the Mumbai Port Trust on a build-operate-transfer (BOT) basis. GIPL and Dragados SPL are the partners in the SPV. In December 2009, GIPL had announced its decision to purchase an additional 24% stake in ICTPL from Spain-based Dragados.
The first stake purchase of 24% will take GIPL’s total stake in the SPV to 74%. As Dragados plans to completely exit from the project, another 26% stake is on offer for GIPL. However, due to the concession agreement signed for the BOT project for developing the terminal, this additional 26% stake purchase can be completed only after six years.
“The 24% stake purchase is an immediate one, which does not involve any issues. However, as Dragados plans to exit the project completely, we require giving the company some understanding for the future 26% stake purchase. This additional 26% stake purchase needs some statutory formalities to be taken care of,” explained Mr Umrigar.
Dragados plans to globally exit from all of its shipping, ports and logistics projects, to focus on energy-based projects. “Their decision to exit gave (us) an opportunity,” added Mr Umrigar.