Jan 25, 2003|
Result oriented week
Two sectors (IT and banking) and quarterly results dominated the activity on the bourses. The beating the markets took on Friday is rumoured to be due to a mutual fund closing operations in India selling aggressively.
The week began on a sour note as the markets took off from where they left off. Monday saw selling in technology stocks continuing and a buying frenzy in PSU banking stocks. Corporation Bank's results added fuel to the fire. The bank's interest income saw an 8% YoY increase, while its net profit jumped by 66% for the quarter ended December 2002. Bharti Tele also posted a strong performance for the quarter. Consolidated revenues more than doubled for 3QFY03 with net loss significantly lower at Rs 71 m compared to Rs 418 m in the corresponding period previous year. This was primarily on account of improvement in operating margins from 21% in 2QFY03 to 28% in 3QFY03.
Private Sector Units (PSU) were the flavour for Tuesday on the back of the Attorney General, Mr. Soli Sorabjee, giving a favorable opinion on the sale of government's stake in Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL). HPCL, Shipping Corporation and Steel Authority of India (SAIL) were prominent gainers among PSU stocks. The buying in banking stocks and selling in technology stocks continued. Trading on Wednesday was a mirror image of the trading seen on the first two days of the week. Software stocks were back in favour, while it was the banking stocks that took a beating. Tata Chemicals announced that it is considering a merger arrangement with Hindustan Lever Chemicals Limited (HLCL). Hindustan Unilever (HLL), the parent company, has a 50% stake in HLCL. If the stake sale goes through, HLL will also be a beneficiary. The merger was approved on the 24th of January, 2003 with swap ratio of 2:5 i.e. Five shares of Tata Chemicals Ltd will be issued to the shareholders of HLCL for every two equity shares held.
Thursday was a bad day for the bourses. Technology heavyweight Satyam missed its own earnings guidance by wide margin. The company reported a 5% growth in topline (QoQ) while its bottomline has fallen by 1%. The situation was aggravated by the fact that HCL Technologies too reported numbers almost as soon as Satyam did and its numbers too were below market expectations. The topline was higher by 6% while the bottomline grew by 6% QoQ in the December quarter. And then came the news that Novartis had discontinued the trials for Dr Reddy's DRF 4158, a dual acting insulin sensitiser. Top scrips, irrespective of the sector, were in the red at the end of the day with the exception of majors such as Tisco, Gujarat Ambuja and Hindustan Aluminium Company (Hindalco), which saw moderate gains. Tisco managed to close with gains on the back of its strong performance for the quarter ended December 2002. The net profits jumped by 712%. The total income (net of excise) was up 27%. The markets saw a sharp sell off on Friday, despite a positive open. Sensex fell below 3,300.
While the top losers list (BSE A group) features almost exclusively software stocks, the top gainers over a week is a mixed bag. The list top loser's from the software sector includes Hexaware Technologies, Polaris Financial, Pentamedia, NIIT, Trygin Technologies and Allied Digital.
Going forward with no triggers in the near term and sentiments towards software stocks soured, the markets are likely to remain range bound. The Iraq-US conflict and supply pressure could cause the NSE-Nifty and the BSE-Sensex to take a beating. The buying could be seen in old economy blue chips as players shift to defensive stocks. Select technology majors could see bargain hunting a lower levels.
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