Sensex sheds 19 points, ends at 16,894

Dollar hits a new three-month high; Indian markets continue on their volatile trend

Indian markets continued to remain in the red on weak global cues. The Sensex declined 19 points from the previous day’s close, ending the day at 16,894, while the Nifty remained flat at 5,042.

During the day, Tata Steel rose 1%. As per media reports, the company’s European unit Corus has secured a €350-million contract to supply rail tracks to French railway operator SNCF.

Ennore Coke rose 3% on reports that the company plans to buy a 90% stake in an Australian mining firm.

Titagarh Steel shot up 10% after the Calcutta High Court approved the amalgamation plan of the company and unlisted Titagarh Biotec with group firm Titagarh Wagons.

Diamant Investment & Finance was locked at 5% after the company said its board will meet on 24 December 2009 to consider issue of bonus shares and raising funds.

The Gemini-PointRed combo outbid various multinational companies to win another major mobile WiMAX deal from BSNL worth Rs435 crore. Gemini Communication was up 5%.

Patel Engineering shot up 2% on reports that the company had bagged an order worth $1 billion in Djibouti.

Pratibha Industries secured a contract worth Rs129.89 crore from the Haryana Urban Development Authority. The project is in joint venture with SMS Paryavaran Pvt Ltd. The stock was up 2%.

Usha Martin Infotech has signed a non-binding, non-exclusive Memorandum of Understanding with Pearson Education India for foraying into school management. The stock was up 5%.

Tanla Solutions gained 6% on reports that Tanla Mobile Pvt Ltd (TMPL), a subsidiary of Tanla Solutions (TSL), had commenced operations from DLF Cyber City in the Special Economic Zone at Hyderabad.

KEC International has won major orders in Algeria and Abu Dhabi worth Rs474 crore and Rs76 crore respectively. The stock was up 3%.

As per data released by the government, the food price index rose 19.95% in the year to 5 December 2009. The fuel price index rose 3.95% and primary articles index rose 14.98%.

Moody’s Investors Service upgraded the long-term foreign currency (FC) deposit ratings of 14 Indian banks to ‘Ba1’ from ‘Ba2’, following the rating agency's recent upgrade of India’s FC deposit ceiling.

Meanwhile, the two main bourses, Bombay Stock Exchange and National Stock Exchange have reportedly postponed by more than two weeks their move to bring forward the start of trading by 55 minutes, after strong protests from brokers. Extended trading on the two stock exchanges will now begin on 4 January 2010, instead of the earlier planned date of 18 December 2009. The two exchanges had announced late on Wednesday the extension of trade timings in equity and derivatives segments by almost one hour to 9:00am IST effective from Friday, 18 December 2009. The move was to align their timings with major Asian markets.

Today, the dollar rose to a three-month-high against the euro in Asia due to concerns over European bond markets and the US Federal Open Market Committee’s slightly hawkish statement overnight. The US currency is expected to post further gains if December’s Philadelphia Fed Manufacturing Index due later in the day beats market forecasts, highlighting the recovery in the American economy. Economists expect the index to drop to 16.40, a slight deterioration from the index’s previous result of 16.70.

Standard & Poor’s Ratings Services announced that it has revised its ratings criteria for covered bond programs, placed €1.46 trillion worth of such programs on CreditWatch, and signalled these programs may be downgraded in the next few months. This announcement made the markets more bearish over the euro. European banks often raise funds using covered bonds because of their low cost. A ratings cut possibility in bonds means European financial institutions may face difficulty raising funds in the near future, which may spur risk aversion.

Further, Standard & Poor’s announcement on Wednesday that it had cut Greece’s credit rating, as it has the widest budget deficit among the European Union nations, added further pressure on the euro.

During the day, Asia’s key benchmark indices in China, Japan, Indonesia, Singapore, Hong Kong and South Korea fell by between 0.14%-2.34% despite the US Federal Reserve saying that the US economy was improving.

On Wednesday, 16 December 2009, the Dow Jones Industrial Average was down 11 points while the S&P 500 and the Nasdaq Composite were up 1 point and 6 points respectively after the Fed offered no surprises in its latest statement.

The Federal Reserve kept its target range for its bank lending rate at zero to 0.25%, the same level since last December 2008, and it repeated its pledge to keep rates at exceptionally low levels for an extended period.

The Fed also said that the economy had continued to pick up and that deterioration in the labour market was abating. However, the Fed still predicts unemployment to remain high. The Fed statement said that household spending appears to be expanding at a moderate pace. The central bank said that the economic conditions, including low rates of resource utilisation, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels of the Federal funds rate for an extended period. Taking note of the improving conditions for banks, the Fed said that it would shutter most of its emergency lending facilities on 1 February 2010.

In premarket trading, the Dow was trading 45 points higher.

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