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Tech-tonic - Views on News from Equitymaster
 
 
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  • Apr 17, 2004

    Tech-tonic

    It was an important week for the markets, as software majors, Infosys and Wipro, were slated to declare their quarterly and full year results along with some other important results of the likes of Reliance Energy, Zee and Gujarat Ambuja. While it was undoubtedly a week for software stocks, practically all the other results also managed to meet (and some even beat) market expectations. However, despite the good performance by India Inc., investors adopted a cautious approach towards committing their monies, which is evident from the subdued week-on-week gains on the indices. During the week, while the Sensex gained a mere 0.4%, the Nifty closed higher by 0.8%.

    After the tug-of-war witnessed on the bourses last week, this week witnessed some volatility in the first half. Monday saw the indices open marginally in the positive and trade in a range bound nature for most part of the day. However, the final hour of Monday's trading saw the indices plunge deep into the red on the back of all round profit booking. But what followed next day was something, which took the markets by surprise. India's largest listed software company, Infosys, beat all market expectations by doling out surprises for investors, which led to an all round buying frenzy in technology stocks. The effect of this was also seen on the broader indices, which mirrored the BSE IT index (see chart above).

    Wednesday was a holiday on account of Dr. Ambedkar Jayanti. Following the huge rally on Tuesday, Thursday saw investors take some money off the table, which translated into some weakness on the bourses. Friday, however, saw the indices open with substantial gains on the back of the optimism created by the impressive Wipro numbers and also the first official estimates of the Indian Metrological Department, wherein it forecasted a near normal monsoon this year with only a 4% probability of deficient rains. However, once again, profit booking at higher levels erased some of the indices' gains. It was an extended week for the Indian stock markets as both the indices remained open on Saturday for a few hours. However, the trading session remained largely lackluster.

    Key gainers over the week (NSE-50)
    COMPANY Price on
    April 8 (Rs)
    Price on
    April 17 (Rs)
    %
    CHANGE
    52-WEEK
    H/L (Rs)
    BSE-SENSEX 5,838 5,862 0.4% 6,250 / 2,904
    S&P CNX NIFTY 1,854 1,868 0.8% 2,015 / 920
    DABUR 74 85 14.0% 98 / 36
    ORIENTAL BANK 321 358 11.6% 367 / 73
    WIPRO 1,465 1,617 10.4% 1,870 / 797
    TATA CHEM 132 145 10.0% 189 / 66
    TATA TEA 335 368 9.9% 420 / 190

    It was a week dominated by the software sector with the key results of Infosys and Wipro having been declared. Infosys continued with its tradition of surprising the markets during its results. This time, in the form of a one time special dividend of Rs 100 for FY05 and a 3:1 bonus, (three shares for every one share held) apart from its usual impressive financial performance. Wipro also did an Infosys and apart from putting up an impressive 4QFY04 performance, it too announced a bonus of 2:1 and a special dividend of Rs 25 per share on the existing paid-up capital (i.e. prior to the bonus issue). It also announced a regular bonus of Rs 4 per share, which will be equivalent to Rs 1.33 per share on the post bonus issue paid up capital. The effect of these results was felt across technology stocks with some of the gainers during the week being Infosys (1%), Wipro (10%), Satyam (7%) and HCL Tech (5%).

    Key losers over the week (NSE-50)
    COMPANY Price on
    April 8 (Rs)
    Price on
    April 17 (Rs)
    %
    CHANGE
    52-WEEK
    H/L (Rs)
    DR. REDDY 956 917 -4.1% 1,471 / 805
    HDFC 664 637 -4.1% 700 / 293
    HERO HONDA 513 495 -3.6% 544 / 180
    HINDALCO 1,334 1,291 -3.3% 1,599 / 576
    ONGC 887 865 -2.6% 1,000 / 350

    Among the other results, Hero Honda declared robust 4QFY04 results this week, wherein it registered a 42% bottomline growth on the back of a 50% topline growth. Further, it is believed to have earmarked Rs 2 bn for a capacity expansion plan. It is eyeing a capacity of around 200,000-250,000 units for the new plant. The company's current two plants in Haryana are running full steam and given the industry's growth prospects, the company felt that it was necessary to go for a green field expansion. The stock, however, lost 4% this week. Other results during the week included Zee, Hughes Software, Gujarat Ambuja, Reliance Energy and HDFC Bank. Further, it must be noted that the NDTV IPO is opening on Monday.

    Going forward, since we are in the midst of the earnings season, sentiments in the month of April would primarily be governed by the results being announced by industry majors as markets adjust (and re-adjust) their expectations on the basis of the results delivered. Hence, some amount of volatility this entire month cannot be ruled out. Some key results due next week include IDBI Bank, Cipla, Satyam, Siemens and Ranbaxy. Investors are advised not to make decisions in a haste and think rationally. Happy Investing!

     

     

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