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Software sell off...

Feb 15, 2003

Pessimisms continued to rule the markets throughout the week despite easing of tension on the US-Iraq war front. One major factor contributing to the weak sentiment has been bad news for the software sector resulting in all round selling in major sector heavyweights during the week. Buying interest seems to be limited to select stocks with players entering at lower levels indicating bargain hunting. The gains posted by the players have been modest. With just two weeks to the Union Budget the traditional pre budget rally seems to be conspicuous by its absence, with markets closing on a weak note. For the week, Nifty closed with losses of 2%, while the BSE Sensex lost similar levels (1.7%). With these losses the bourses have turned back to similar levels witnessed nearly two weeks ago indicating caution and uncertainty over the direction of movement for close to a month.

The news that four other US states contemplating similar law on the lines of that enacted by New Jersey to discourage outsourcing to protect local jobs last weekend led to pressure on software sector throughout this week. Index heavyweight Infosys along with other software majors witnessing heavy losses on Monday. Tuesday limited the slide to a few points led by buying interest in FMCG major HLL as investors entered at lower levels. HPCL also added gains on the back of news on the divestment front. However, software sector continued to have negative influence on the Sensex.

Top losers over the week: BSE 'A' Group
COMPANY Price on Feb 7 (Rs) Price on Feb 14 (Rs) %CHANGE 52-WEEK H/L (Rs)
BSE-SENSEX 3,280 3,223 -1.7% 3,758 / 2,828
S&P CNX NFTY 1,058 1,036 -2.0% 1,206 / 920
TRIGYN TECHNOLOGIES 20 17 -18.0% 110 / 16
PENTAMEDIA 13 11 -17.7% 62 / 11
PSI DATA SYS 70 60 -13.7% 210 / 60
HERO HONDA 237 206 -13.0% 402 / 205
BPL LIMITED 38 33 -12.3% 87 / 32

On Wednesday, the Sensex continued its southward journey on the back of selling pressure in index heavyweights. Software stocks continued to draw most of the flak despite positive news on export front. The sector has registered healthy export growth of 28% for the nine-month period of April-December 2002. Banking sector, however, provided some succor on the back of announcements by various banks. SBI chairman indicated that the government is positively considering the hiking FII investment limit in the bank. Former promoter of Centurion Bank, Mr. Dev Ahuja's plan to sell his holding in the bank at Rs 11.5 per share also positively impacted the bank stock. In addition, ICICI Bank was also in favour on the back of news that it plans to set up 10,000 EDC (electronic data capture) terminals, which will boost its merchant banking business.

Top gainers over the week: BSE 'A' Group
COMPANY Price on Feb 7 (Rs) Price on Feb 14 (Rs) %CHANGE 52-WEEK H/L (Rs)
ASHOK LEY FIN 47 49 4.3% 56 / 34
HPCL 299 310 3.6% 339 / 167
ICICI BANK 144 148 2.8% 165 / 106
PFIZER LTD. 323 329 2.0% 564 / 320
THERMAX LTD. 147 149 1.5% 162 / 75

After a holiday on Thursday, on Friday the markets continued to witness pressure due to all round selling. Except select banking stocks the market witnessed selling in index heavyweight HLL, which lost considerable ground. Infosys, MTNL and SBI all closed with in the red.

With the world's leading countries like Germany and France pushing for a diplomatic solution to the Iraq impasse, the issue seems to have tempered down for now and consequently major global markets have closed with gains Indian markets too are expected to recover on the back of investors returning to markets to pick up stocks at attractive levels and a possibility of a late pre-budget rally cannot be altogether written off. Having said that we must also point out that the geopolitical concerns have not fully disappeared with the aggressive posturing of the US, hence any rally if seen may be short lived and with out much strength.

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