The Hindu Business Line : Steel, auto stocks witness sharp decline

An across-the-board selling pressure dragged down the BSE Sensex by 179.74 points to close at 5520.66 points. The S&P CNX Nifty declined by 48 points to close at 1763.40.

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The bearish trend has been prevalent in the markets for the past few trading days, although markets witnessed a brief respite on Friday when the Sensex gained about 50 points. Steel stocks and auto stocks saw some of the sharpest declines.

The Sensex opened the day on a strong note at 5745.06 points and traded in a narrow range during the earlier hours of the trading session. However, the market turned bearish before long and the benchmark index declined by 3.15 per cent. The Sensex has depreciated by about 7 per cent in the last one week. A

ll the 30 shares that constitute the Sensex declined which was an indication of the extreme negative sentiment in the market. About 72 per cent of the stocks traded on the exchange declined on Monday.

Steel stocks were among the worst affected. This could be possibly attributed to the anxiety among investors in the market in the face of the mounting backlash from user industries on rising steel prices. Steel companies are under pressure from the Government to keep the steel prices at check, even as prices of their key inputs such as coking coal are spiralling. Stocks such as Essar Steel and Jindal Steel however did not decline too sharply. These stocks may not be as affected probably because these companies are backward integrated, with access to iron ore and hence are less affected by the hike in raw material prices. Essar Steel and Jindal Steel declined by Rs 1.80 and Rs 3.6 respectively. Auto stocks took a beating as well. The stocks had been on an uptrend on the back of increased offtake in February. However, with the end of the fiscal year approaching, the markets may be anticipating a negative impact on the financials of these companies owing to the hike in prices of steel, a key input for the auto industry.

Even as the stocks declined, a few stocks bucked the trend. Bombay Dyeing surged by 20 per cent touching its upper circuit filter. Textile stocks have witnessed activity lately, as retailers such as Wal-Mart and J C Penny's have displayed interest in outsourcing garments from India. FII's too have been active in the stock. FII stake in the company had gone up sharply for the December 2003 quarter before the correction in the broad markets set in.

When most FMCG stocks have been losing shine Nestle India gained by Rs 15.55 to close at Rs 598.95. The company declared good earnings numbers on Monday. Marico Industries gained by Rs 8.1 to close at about Rs 283. This follows the declaration by the company of an interim dividend of Rs. 2.50 per share. The company had also announced a bonus issue of one share for each share held. It also plans to redeem preference shares at par.

Despite company specific positive news flowing in, the bearish sentiment dragged the stock prices of some of the stocks such as Apollo Tyres, Hindustan Sanitaryware and Ram Informatics.

Apollo Tyres declined by Rs 7.3 to Rs 229.80 even as the company announced today the acquisition of a 14.90 per cent stake by Compagnie Financiere Michelin. SPL Ltd and Hindustan Sanitaryware announced that gas supply by GAIL, which had been stopped in July, was restored today. Further the supply of LNG as against natural gas that they had received earlier was likely to result in substantial cost savings. Despite the positive impact of these announcements, Hindustan Sanitaryware declined while SPL Ltd remained stable.

A number of stocks reached new lows such as Patni Computers, Indra Gas, Surya Pharma, L.G. Balakrishna Brothers, Elgitread to name a few.