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Cautious optimism! - Views on News from Equitymaster
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  • Jan 10, 2004

    Cautious optimism!

    It was a week dominated by utmost caution on the Indian bourses, which was evident from the selling pressure witnessed at every rise in the indices. However, at the end of the day, the bulls, once again, were able to display their strength and command over Indian sentiments. Both the Sensex (1.5%) and the Nifty (1.3%) closed with gains and this is despite the strong correction witnessed in the middle of the week, as investors opted to take home some profits. Also, the indices hit historic intra-day highs during early trade on Friday before closing at all-time highs.

    The week also marked the beginning of 3QFY04 results season with a couple of banking (J&K Bank and HDFC Bank) and few software (Infosys, Hughes Software and MphasiS BFL) companies declaring results. While much of the behaviour on the bourses was largely expected, the big surprise, which aided market sentiments, was the announcement of a slew of excise and customs duty cuts by the Finance Minister (as part of a 'mini budget'), which, on a broader scale, bodes well for the Indian economy.

    Only one word would be apt to describe the trading week just ended - volatile! One trend, which seemed to be visible during the week, was that at every rise, the indices were faced with intense selling pressure. However, at the same time, at every fall, investors did not lose the opportunity to lap up stocks, which always aided the indices to recover from their intra-day troughs. However, it must be noted that it may have been retail participants and mutual funds, which released the selling trigger. This seems so as FIIs continued to pump in money into equities (including the day the Sensex corrected by 100 points). In the first 4 trading days of the week, Foreign Institutional Investors (FIIs) invested about Rs 6.2 bn (US$ 138 m).

    However, the big story this week was the announcement of the 'mini-budget' by the Finance Minister, who doled out tons of goodies for India Inc. on Thursday, which was followed by another round of New Year gifts on Friday. But this time, the favourism was not limited to corporate India and was also shown towards the rural consumers, senior citizens, students and farmers. Broadly, in the continuation of the 'feel-good factor' package, the government has announced loans at concessional interest rates to the above class of people. All in all a seemingly populist budget!

    Top 5 gainers over the week
    COMPANY Price on
    Jan 2 (Rs)
    Price on
    Jan 9 (Rs)
    % CHANGE 52-WEEK
    H/L (Rs)
    BSE-Sensex 6,027 6,120 1.5% 6,250 / 2,904
    S&P CNX NIFTY 1,946 1,972 1.3% 2,015 / 920
    SHREE RAMA MULTI 11 14 29.2% 14 / 4
    HCL INFOSYS 391 491 25.5% 545 / 72
    ESCORTS 88 109 23.7% 113 / 35
    TATA POWER 329 406 23.1% 419 / 107
    NOCIL 20 24 23.0% 30 / 5

    The positive effect of the announcements by the Finance Minister was clearly visible in Friday's trade on certain sectors and stocks. HCL Infosys was one of the biggest gainers amongst the 'A' group stocks during the week. This can primarily be attributed to the reduction in duties on computers, which will have a significant positive impact on the hardware industry, as this would effectively translate into a fall in prices of computers and make them more affordable to consumers. Tata Power also gained on the back of announcements in the mini-budget. On the one hand, while reduction in customs duty on power project imports would aid the current ongoing power reforms by improving project costs, the reduction in custom duty on coal would aid in rationalising costs for the power sector, as coal is an important input in the generation of power. NOCIL was in the limelight on the back of the news that Reliance is acquiring the petrochemicals and plastics business of the company.

    Top 5 losers over the week
    COMPANY Price on
    Jan 2 (Rs)
    Price on
    Jan 9 (Rs)
    % CHANGE 52-WEEK
    H/L (Rs)
    KINGFISHER PROP 62 47 -24.0% 69 / 15
    INDRAPRASTHA GAS 148 129 -13.3% 0 / 0
    DSQ SOFTWARE 21 18 -13.2% 25 / 5
    SILVERLINE TECH 11 10 -12.9% 19 / 4
    SSI LTD 208 187 -10.3% 216 / 54

    Going forward into next week, the mood seems that of cautious optimism, however, intra-day volatility cannot be ruled out. We are currently in the results season and the markets have already built in huge expectations from India Inc. for the December 2003 quarter results, which could be a spoilsport if some big names fail to deliver. Some important results lined up next week include Mastek, Digital Globalsoft, Hero Honda, Corporation Bank, HDFC and Indian Hotels. Further, markets are already at their historic highs and we would like to re-iterate the fact that from hereon, any 'sustained' upsurge in the markets has to be sustained by deliverables from India Inc.



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