Hindustan Lever led the decliners. The stock shed 1.8% to Rs 238.90. Tata Steel fell 1.5% to Rs 518. Tata Steel said last week it may bid for the Anglo-Dutch steel maker, Corus Group Plc. Gujarat Ambuja Cements shed 0.4% to Rs 123.25. UltraTech Cement rose 2.7% to Rs 893.

Shree Cement fell 3.8%, to Rs 1,095. The company today reported a net profit of Rs 77.79 crore for Q2 September 2006 as compared to a net profit of Rs 37.36 crore for Q2. The results reflected Rs 33 crore tax provision in the current quarter compared to tax-free earnings a year ago.

Reliance Industries lost 0.3% to Rs 1,150.35. The stock traded between Rs 1,158 and Rs 1,161 in early afternoon trade.

Bank shares declined on profit-taking. ICICI Bank shed 0.8% to Rs 693 and State Bank of India shed 0.9% to Rs 1,025. However, HDFC Bank (up 1.3% to Rs 944.70) held positive territory. HDFC Bank announces Q2 results on October 17, 2006. Investors expect strong Q2 results from HDFC Bank.

Infosys, is expected to report a 40.8% rise in net profit for the July-September quarter on Wednesday, when it starts the earning season.

9:45AM Market opened little changed.
Stock markets opened in the positive. The early strength was partly due to gains by housing stocks on positive broker comments. Standard Pacific (SPF: chart), Toll Brothers (TOL: chart) and D.R. Horton (DHI: chart) helped to lead the housing sector higher after J.P. Morgan upgraded its ratings on the homebuilders. Transportation stocks also showed some strength amid a notable decline by the price of oil. Meanwhile, some healthcare provider stocks came under pressure, helping to limit the upside for the broader markets. LifePoint (LPNT: chart) and Community Health (CYH: chart) moved notably lower following downgrades by Deutsche Securities.

Google (GOOG: chart) stood out as an early riser, up 2%, as investors cheered its agreement to acquire privately held YouTube for $1.65 billion. CVS Corp. (CVS: chart) rose 2.8% after the drugstore chain posted higher same-store sales and raised its earnings forecasts. In the first minutes of trading, the Dow Jones industrial average fell 2.88, or 0.02%, to 11,854.93. The Dow remains near its record closing high of 11,866.69. The Standard & Poor's 500 index fell 0.33, or 0.02%, to 1,350.33, and the Nasdaq composite index rose 0.53, or 0.02%, to 2,312.30.

9:30AM FTSE 100 advances on Tuesday on merger speculation.
By late morning, the FTSE 100 was 24.5 points, or 0.2%, higher at 6,055.4, advancing to a five-year high.

Advancers

Man Group jumped 5.6% higher on reports that Goldman Sachs was considering a takeover of the hedge fund group. Dual-listed Brambles Industries rose 2.2% in the wake of a strong performance in Australia overnight. First Choice was up 5.7% as takeover speculation boosted the holiday group.

Amvescap gained 5% after the fund manager said late on Monday that assets under management were growing steadily from August and July. Shares of mining company Vedanta Resources advanced 0.6% as the second-quarter aluminum production advanced 71.7% to 79,000 tonnes, copper cathode production in India moved up 17.6% to 80,000 tonnes and Zambia copper cathode production decreased 16.2% to 31,000 tonnes.

Decliners

Corus fell 4.4% as the Anglo-Dutch steelmaker has held talks with Tata Steel of India but has yet to receive a firm bid proposal. Carnival slipped 1.9% after JP Morgan downgraded the cruise operator from overweight to neutral. The bank said there could be limited advantage to the shares in the near term.

Northern Foods was 3.6% lower after it said underlying revenue for the 26 weeks to the end of September fell 1.1 per cent on the prior year. Inter Link Foods fell 14% following its previously announced talks with a private-equity firm in relation to a possible takeover have been terminated and no offer is anticipated.

FireOne plunged 24.4% after its 76%-owner Optimal Group said that, in light of its expectation that U.S. Administration will soon sign into law the Unlawful Internet Gambling Enforcement Act of 2006, it would stop processing settlement for transactions originating from consumers that may be viewed as related to online gambling.

Other news

The trade gap of the UK was reduced a little in August after the deficit for July was revised upwards to reflect the effects of VAT fraud, according to official data.

09:00AM Stock futures pointed to a positive start.
U.S. stock futures seemed poised for a positive market opening, supported by lower oil prices and gains for Internet stocks after Google agreed to buy video Web site YouTube Inc. Investors were also looking forward to the third-quarter earnings season. Dow component Alcoa (AA: chart) will be first to release quarterly results, expected to earn 77 cents a share on revenue of $7.75 billion.

Drugstore chain CVS Corp. (CVS: chart) rose 2.3% before the opening bell to $30.40 after the company raised its Q3 and full-year earnings outlook. The stock was up nearly 2% in pre-open trading. Shares of Supervalu (SVU: chart) climbed over 3% in the pre-open after the grocery retailer reported Q2 earnings increase, beating forecasts.

Elsewhere, cruise operators Carnival (CCL: chart) and Royal Caribbean Cruises (RCL: chart) were downgraded at J.P. Morgan to neutral. The same brokerage took a more positive stance on homebuilders, upgrading D.R. Horton Inc. (DHI: chart) and Standard Pacific Corp. (SPF: chart) to overweight from neutral and Toll Brothers Inc. (TOL: chart) to neutral from underweight. In merger-and-deal news, Google Inc. (GOOG: chart) added 0.8% to $431.70 after the Internet services giant agreed to buy YouTube for $1.65 billion. S&P 500 futures edged up 0.70 of a point at 1,359.90 and Nasdaq 100 futures were up 3.75 points at 1,707.50. Dow industrial futures were flat at 11,928.