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Results fail to enthuse

Apr 26, 2003

This week’s performance was nothing to cheer about for the investors. Barring the opening day of the week, the indices closed in the negative on all other trading days. The BSE Sensex lost 2% while the Nifty lost 1.7% during the week. It must be noted here that it was the third consecutive week of losses for the Indian indices. During this period, the Sensex has lost 7.7% while the Nifty has lost 9.1%. The weakness in the indices only confirms the fact that the results season has not gone down well with the investors.On Monday, indices opened on a strong note after witnessing considerable weakness in the previous two weeks. Disappointing results and lower guidance from tech majors made the investors shift their focus towards old economy stocks. The indices managed to close in the black primarily on the back of buying witnessed in index heavyweights, Reliance and HLL. The former witnessed buying on expectations of good quarterly and full year FY03 numbers. Also, barring Infosys, buying was witnessed in other battered technology stocks.

COMPANY Price on
Apr 18 (Rs)
Price on
Apr 25 (Rs)
H/L (Rs)
BSE-SENSEX 2,9852,924-2.0%3,478 / 2,828
S&P CNX NFTY 941924-1.7%1,137 / 920
NIIT9812829.9%315 / 93
EXIDE INDUSTRIES759526.5%104 / 64
HCL INFOSYS8110125.5%149 / 72
TV 18556518.1%115 / 49
UNITED PHOSPHORUS12114217.7%190 / 55

However, that was the end of the short upmove as the indices continued to lose ground every trading day from thereon. But this time, the spoilsports were the old economy stocks. Good results from Reliance and ‘better than Infosys’ guidance from tech major Satyam Computers, also failed to perk up overall investor sentiment. Though Satyam’s outlook managed to attract some buying for the technology stocks.

COMPANY Price on
Apr 18 (Rs)
Price on
Apr 25 (Rs)
H/L (Rs)
BANK OF BARODA9081-10.2%98 / 44
GSFC1615-9.5%41 / 14
HDFC330300-9.1%394 / 289
HPCL295271-8.1%330 / 167
BPL LIMITED2624-8.1%87 / 24

Just to recap the Reliance numbers, the company’s topline increased by 9% in FY03 over the previous year while it managed to shore up its bottomline by a healthy 27% YoY. This is particularly commendable in the backdrop of the fact that the company has acquired two companies (IPCL and BSES) and merged its operations with Reliance Petroleum. Moreover, the company was able to tide over factors like a downbeat economy and rise in crude prices, which led to an escalation of feedstock and key raw material prices. But the 4QFY03 numbers indicated a slowdown, both in topline, as well as a shrinking of operating margins. Satyam Computers, on the other hand, posted a 17% topline growth and a 31% fall in bottomline, which was primarily due to a one-time write-off of investments in its subsidiaries. However, it gave a guidance of 9% growth for FY04 (not accounting for the extraordinary items).

Among others, PSU stocks were particularly out of favour. PSU banking stocks turned out of favour on the back of the government failing to take a decision on raising the FDI caps in various sectors including PSU banking stocks. It must be noted here that an expectation of a raise in FDI limits was also one of the reasons for the buoyancy being witnessed in PSU banking stocks. Among other PSU losers, HPCL (8%) and BPCL (2%) lost ground as concerns propped up as regards their divestment. Uproar in the Lok Sabha against divesting profit-making PSUs took center stage, which could prove to be a hurdle going forward for the smooth transition of the divestment process and, economic reforms on a broader perspective.

Going into the next week, results again could play a vital role for the markets. Moreover, the impact of SARS is already becoming a major concern the world over. China has reported the maximum detections and deaths related to SARS. It must be kept in mind that China, with a growth rate of nearly 8%, has a major role to play in the development and growth of world trade, and Asia in particular. Travel advisory warnings could have a negative impact on world trade, which could slow down the already lackluster world economies. One of the biggest concerns on the domestic front could be the monsoons role. As the MET department has already projected a below normal monsoon, domestic economic growth could take a hit in FY04.

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