Nifty falls below 2700; RIL-RPL merger non-event

2 Mar 2009, 1054 hrs IST, ET Bureau

MUMBAI: Equities were witnessing selling pressure as investors booked profits
following sell-off in Asian markets. Hopes of support from the index heavyweight Reliance Industries were short-lived as the merger swap ratio between the RIL-Reliance Petroleum failed to lift sentiments.

According to the merger ratio Reliance Petroleum shareholders will get one share of Reliance Industries for every 16 shares held. Reliance Industries is to extinguish treasury stock. The merger will be effective from April 1, 2009.

The merger of stand-alone refinery Reliance Petroleum with integrated oil, gas and petrochemicals major Reliance Industries would create truly global-scale operations, and more. It would lead to synergies, tax savings and rev up valuations right across the board. The stock market did appear to give the thumbs down to the news of the merger on Friday, albeit only slightly so
“Dow closed in the negative and all Asian markets are in the negative. The US market corrected on Friday on the back of news that the US government will increase its stake in Citigroup. Reliance and RPL have approved a merger and the swap ratio has been decided at 1 share of Reliance for 16 shares held in RPL. We continue to believe that globally things will get worse from current levels. Hence, we remain bearish on the market for the short term. For the day, we expect the market to open down and see selling continuing through the day,” said Religare report.

At 10:20 am, National Stock Exchange’s Nifty was at 2698.40, down 65.25 points or 2.36 per cent. The index touched an intra-day low of 2677.65 and high of 2764.60.

Bombay Stock Exchange’s Sensex was at 8682.17, down 209.44 points or 2.36 per cent. The broader index touched an intra-day low of 8644.03 and a high of 8762.88.

“Trend deciding level for the day is 8,855 / 2,753. NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 8,981 / 2,798. However, if NIFTY trades below 8,855 / 2,753 for the first half-an-hour of trade then it may correct up to 8,765 / 2,719,” said Angel Broking note.

Second rung stocks were less affected. BSE Midcap Index was down 1.18 per cent and BSE Smallcap Index slipped 0.69 per cent.

Zee Entertainment (-5.94%), Tata Steel (-4.92%), HDFC Bank
(-4.19%), Punjab National Bank (-4.06%) and Power Grid (-3.87%) were the major Nifty losers.

BPCL (0.03%) was the only gainer.

All the sectoral indices were in the red led by losses in metals, banks and realty space. BSE Metal Index was down 3.23 per cent, BSE Bankex was down 3.15 per cent and BSE Realty Index slipped 2.22 per cent.

Shares of Tata Steel were down on profit booking after a surge Friday when the company announced its consolidated results. The company reported consolidated net profit of Rs 732.2 crore for the third quarter ended December 2008. The Jamshedpur-based steel company also said it planned to prepay around $400-500 million of its debt next financial year. Although Tata Steel’s year ago consolidated net profit at Rs 1,325 crore was higher, the current financial year’s third quarter net profit surprised the market.

Shares of Reliance Industries were down 2.14 per cent and Reliance Petroleum was marginally lower.

Meanwhile, Asian stocks slid, dragging the Nikkei 225 Stock Average down the most in in five weeks on concerns the global recession is deepening. The Nikkei 225 Stock Average declined 3.90 per cent, Hong Kong’s Hang Seng Index sank 3.83 per cent, South Korea’s Kospi slid 3.98 per cent and Taiwan Weighted was down 2.82 per cent.

Market breadth was negative on the BSE with 979 declines and 508 advances.


via:E.T