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Bears show no mercy!

Jan 17, 2004

It was a bear dominated week for Indian equities. All round selling pressure saw the indices close significantly lower in the current week. While the BSE-Sensex lost 2.8%, the NSE-Nifty closed lower by 3.6%. Despite the dole out of some good news by the government and a largely expectations-matched December quarter numbers week, the indices failed to sustain ground as investors decided to cash-in some profits.

Friday (last week) had seen the indices create another history wherein the Sensex had made an all-time (intra-day) high of almost 6,250 and the Nifty had crossed the magical 2,000 mark. However, soon after that, the indices had witnessed a strong bout of profit booking, which saw them close on a flattish note. Continuing from where it was left off last week, the current week kick-started on a rather weak footing with profit booking across sectors leading the indices into the red on Monday. However, Tuesday and Wednesday saw a reversal of trend as investors lapped up stocks at lower levels post Monday's correction. Further, Wednesday's gains were supported by the announcement of a proposal to hike FII investment limits in banking, telecom and petroleum and natural gas sectors.

On the back of two continuous days of strength, Thursday's trading began on a firm footing taking the Sensex, once again, close to 6,250 levels. However, the news of the Cabinet's decision to defer changes in the FII limit in the telecom sector triggered a massive sell-off across sectors during Thursday's trade, which saw the indices lose about 2%. However, private banking stocks managed to hold ground amidst the carnage on the bourses. Friday saw a continuance of the weakness as both the indices, once again, lost about 2% each, this time over concerns over a possible ban on investments through participatory notes (PN). However, this correction, which was long overdue, was imminent considering the recent run up in the indices that saw the indices flare by almost 20% since December 2003.

The big story this week was the announcement of the raising of Foreign Institutional Investors (FIIs) limits in the banking sector, wherein the limit of FDI investment has been raised from 49% to 74%. As per the new norms, FIIs can acquire up to 49% stake in a private bank, albeit adhering to the overall 74% foreign investment ceiling. The development is a big positive for the private banking sector, as it would lead to greater inflow of capital and strategic expertise into the country. This move is also likely to fuel consolidation in the banking industry. Some key gainers. However, the postponement of a similar decision for the telecom sector led to a sell-off in telecom stocks. Some key losers.

Top 5 gainers over the week
COMPANY Price on
January 9 (Rs)
Price on
January 16 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
BSE-Sensex 6,1205,946-2.8%6,250 / 2,904
S&P CNX NIFTY 1,9721,901-3.6%2,015 / 920
INDO RAMA SYN.9010314.9%110 / 25
SESA GOA58065613.1%701 / 59
TV 1820022412.0%255 / 49
SSI LTD.18720610.4%233 / 54
ATLAS COPCO39043010.3%444 / 222

Sesa Goa was one of the biggest gainers (up 13%) amongst the 'A' group stocks this week. The stock has been consistently gaining ground on the bourses over the last few trading sessions. The optimism surrounding the stock is due to the fact that iron ore prices are ruling firm in the international markets. Further, recently, Brazil's CVRD, the world's largest iron ore producer and the world's largest steel producer, Europe's Arcelor, have agreed upon iron ore prices, which are almost 19% higher than 2003. It must be noted that Sesa Goa is the largest domestic private iron ore exporter and strengthening iron ore prices and insatiable iron ore demand from China will help the company improve its earnings substantially.

Top 5 losers over the week
COMPANY Price on
January 9 (Rs)
Price on
January 16 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
SHREE RAMA MULTI1412-18.3%17 / 4
KINGFISHER PROP.4740-16.3%69 / 15
NOCIL2420-15.8%30 / 5
TRIGYN TECH.2319-15.8%28 / 10
SILVERLINE TECH.108-15.5%18 / 4

The Indian bourses welcomed a new member this week. Shares of TV Today got listed on the bourses on Friday at a premium of 132% to its issue price of Rs 95 (Rs 5 face value). TV Today Network (TVTN) is a leading news broadcaster of India having two channels namely, Aaj Tak, a 24-hour Hindi news channel and Headlines Today (an English news channel). Its Hindi news channel, 'Aaj Tak' (launched three years back) is amongst the most popular news channels in the country today. The stock finally closed the day with gains of 92% at Rs 182.

The current week witnessed the announcement of results like Digital, Hero Honda, Corporation Bank, Geometric Software, Mastek, Indian Hotels and HDFC. While the results were largely in line with expectations, their performance has already been factored into the stock prices. This could be one of the reasons that led to investors booking profits. Next week will see another round of important results being announced, some of those being Wipro, GAIL, Bharat Forge, Tata Power, Bharti Tele, UTI Bank, Grasim, BSES, VSNL, Hindalco, Tisco, Ranbaxy, Maruti and Satyam Computers. However, from the current levels, any upward movement in stock prices needs to be justified by a similar, stronger and sustainable growth in earnings over the longer-term, though short-term momentum could overshadow the same.


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