Cairn slides after Vedanta deal fears

LONDON FTSE 100 CLOSE 5,997.38 +14.04

OIL and gas explorer Cairn Energy was the biggest faller on the Footsie yesterday after media reports in India raised questions over its plan to sell a majority stake in Cairn India to Vedanta Resources.

The Economic Times of India reported that Vedanta will terminate its 5.4 billion purchase if the Edinburgh-based firm accepts conditions from the Indian oil ministry, such as changing the royalty obligations in the Rajasthan block.

Cairn chief executive Sir Bill Gammell and his opposite number from Vedanta are understood to be India for a meeting tomorrow with the oil minister to resolve questions over royalty payments.

Mic Mills, head of electronic trading at ETX Capital, said: "Cairn Energy was knocked by rumours from India that Vedanta may walk away from the Cairn India offload."

Shares in Cairn closed down 11.7p at 426.3p.

The wider Footsie ended the week just shy of the 6,000-mark after yesterday's early gains were pared back by weaker-than-expected jobs data from America.

Shares in London had hit an intra-day high of 6,023.41 earlier in the day but slipped back again after the US government revealed that 36,000 non-farm jobs were created last month, which was far below analysts' expectations of 140.000.

The FTSE 100 Index closed up 14.04 points at 5,997.38, a rise of 0.2 per cent, helped by a strong performance from water companies after broker upgrades on signs that the UK's inflationary bubble will boost results.

Severn Trent and United Utilities showed strong growth in the UK's top-tier, both rising 4 per cent after Bank of America Merrill Lynch introduced "buy" ratings on the pair to reflect higher inflation. Severn was up 50p to 1,440p and United lifted 24p to 579p.

Second-tier stocks Pennon and Northumbrian Water were raised to neutral from under-perform, helping them rise 4.5p to 621.5p and 5.6p to 314.1p respectively.

Oil giant Shell extended the 3 per cent loss seen in Thursday's session with a 1 per cent fall, down 32.5p to 2145p, after its fourth-quarter profits and production performance left investors cold. Other energy stocks remained in the red, with BG Group off 5.5p to 1,429p.

And Thomson owner TUI Travel remained under pressure due to the impact of Egypt's civil unrest on the holiday plans of thousands of customers. Shares dropped another 2p to 241p.

Outside the top flight, ITV surged 4.7p to 84.1p, as Tuesday's bullish statement on advertising revenues from RTL, Europe's largest free-to-air broadcaster, continued to have a positive impact on the stock ahead of its results in March.

Retailer HMV rose 9 per cent or 2p to 24.8p, boosted by speculation that private equity and former retail bosses are eyeing the business for takeover.

Superdry fashion label owner SuperGroup was likewise on the rise, up 12 per cent or 180p to 1,710p, as the market gave the thumbs up to its deal to buy out European franchise partner CNC Collections.

Retail rival French Connection soared 23 per cent - up 15.8p to 84.8p - after the company said its profits for the year would be higher than expected.