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Tug-of-war

Apr 10, 2004

After a smooth ride last week, wherein investors pushed the indices higher by about 5%, this week the movement seemed lackluster. In fact it was a tug-of-war between the bulls and the bears wherein at every rise, bears made their presence felt. Due to this, the indices remained range bound and ultimately, they ended this, Good Friday holiday shortened, week with gains of under 1% each.

The indices opened with a bang on Monday, aided largely by last week's rally on the bourses. After opening on a firm ground, they continued to build on the gains throughout the day. However, a strong bout of profit booking in the final hour of trade on Monday saw the indices lose all the gains before some last minute buying helped them find a footing and close with respectable gains. What followed in the next three trading sessions was largely characterized by volatility, albeit in a narrow range.

Top 5 gainers over the week (BSE 'A' group)
COMPANY Price on
April 2 (Rs)
Price on
April 8 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
BSE-SENSEX 5,788 5,838 0.9% 6,250 / 2,904
S&P CNX NIFTY 1,841 1,854 0.7% 2,015 / 920
EIH ASSO.HOT 45 33 36.8% 47 / 9
BATA INDIA 67 57 18.2% 73 / 26
VOLTAS 129 111 16.4% 159 / 50
IDBI 70 61 14.9% 80 / 17
CADILA HEALTHCARE 535 470 13.8% 539 / 115

The range bound nature of the trade this week can be gauged from the fact that the Sensex hovered in a band of a mere 50 points for major part of the trading days on Tuesday, Wednesday and Thursday. While this indicated lack of conviction and caution on the part of investors before committing their capital, the commencement of the results season could have had also played a role in impacting investor sentiments on the bourses.

Top 5 losers over the week (BSE 'A' group)
COMPANY Price on
April 2 (Rs)
Price on
April 8 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
KINGFISHER PROPERTIES 38 42 -8.4% 69 / 16
PUNJAB TRACTORS 228 247 -7.7% 263 / 119
SHREE RAMA MULTI 7 8 -7.6% 17 / 5
SESA GOA LTD. 482 521 -7.4% 725 / 69
VSNL 184 197 -6.8% 211 / 68

The results season for India Inc. kicked off this week with MphasiS declaring its 4QFY04 results. The company reported consolidated revenue and profit growth of 35% and 47% respectively for FY04. However, the company's performance for the fourth quarter ending March 2004 has been staid, which was also reflected in its stock price on the bourses in Thursday's trade wherein the stock lost 4%. Further, for 4QFY04, while the topline has grown sequentially by 7%, the bottomline witnessed a sequential decline of 12%, mainly due to a substantial decline in other income. On the profitability front, while margins for 4QFY04 have improved marginally, those for FY04 are down by 260 basis points. For detailed analysis of the MphasiS results, click here

Amongst sectoral performances on the bourses, software stocks had a wonderful week with buying witnessed across stocks in the sector. Software stocks had been out of the investors' radar till a couple of weeks back and had received severe investor drubbing seemingly on the back of the uncertainties raised with respect to the effect of a severe rise in the rupee against the dollar. It must be noted that for Indian software companies, US is one of the key markets and a strengthening rupee has a negative impact on their earnings. However, this week saw buying interest emerge in software stocks as investors bargain hunted at lower levels in anticipation of good results from the software majors in the coming weeks. Some key gainers

Another important event this week, or rather two, were the listings of the two IPOs i.e. Power Trading Corporation (PTC) and Biocon Ltd.. Both the stocks not only opened with substantial gains on the day of their listing but also managed to build on the same. These listings were in sharp contrast to that of Patni, which had had a rather lackluster opening. While the PTC stock (oversubscribed 46 times) opened higher by 100% over its issue price of Rs 16, the Biocon stock (oversubscribed 32 times) debuted at 35% higher than its issue price of Rs 315. Both these stocks ended the week with gains of 162% and 84% over their issue price! However, at the current juncture, our advice to investors would be to thoroughly scrutinize the prospects and valuations of the two stocks before taking any investment decision.

Going forward, with key result declarations of the likes of Hughes Software, Infosys, Hero Honda, Reliance Energy and HDFC Bank slated for next week, some amount of volatility on the bourses cannot be ruled out. Further, as the election dates draw near, investors would be keenly watching the activities on the political front, which could be reflected on the stock markets. Thus, investors need to keep a watch on all these developments, as these would play an important role in determining the movement of the indices. However as far as long-term investors are concerned fundamentals should be the only concern. Happy Investing!


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