May 1, 2004|
It was an election-holiday shortened week and the heated activity was not restricted to the political circles only. The Indian bourses felt heightened activity by the bears this week, which went on a selling spree on the back of the exit poll results. The exit polls, which threw up the possibility of a ‘hung' parliament, made jitters run down the market spine. During the week, both the indices lost almost 5% each and there seemed little respite for the bulls.
As expected, the Indian markets opened Tuesday's trading with a bang, albeit in the negative. The effect of Monday's exit poll results, which were flashed across all the morning newspapers, clearly reflected in Tuesday's trade as the indices kept drifting to lower levels throughout the day. The possibility of a hung parliament led to investor panic on the bourses. Despite the continuous flow of good results (barring HLL) by India Inc. the focus was entirely shifted towards elections and the likely government at the Centre. This is because of the concerns pertaining to any new government, which could have an effect on the current pace of reforms in the country. Divestment being a part of the reforms process, the effect of the exit poll results was also seen on oil majors, HPCL (down 10%) and BPCL (down 7%), during the week.
Key gainers over the week (NSE-50)
April 23 (Rs)
April 30 (Rs)
|| 6,250 / 2,904
|S&P CNX NIFTY
|| 2,015 / 920
|| 1,410 / 630
|| 837 / 266
|| 420 / 190
|| 98 / 36
|| 1,258 / 341
Wednesday witnessed some stability in the sense that the selling activity had subsided, though volatility raised its head. The after effects of Tuesday's carnage led to the weakening of investor sentiment as they refrained from taking any positions. In fact, investors did not miss any opportunity of paring their exposure at every rise, which prevented the indices from taking-off. The effect of the derivatives settlement (on Thursday) could also have played their part in keeping the pressure on the indices. Thursday, once again, saw the indices open on a nimble footing, which worsened post the announcement of results by FMCG major, HLL, which reported its steepest fall in profits in the last half-a-decade.
Key losers over the week (NSE-50)
April 23 (Rs)
|Price on A
pril 30 (Rs)
|| 203 / 61
|| 209 / 82
|| 175 / 73
|| 1,599 / 610
|| 490 / 130
Though Friday's trade saw relative strength, as compared to the previous three days of trading, profit booking at the fag end of the day pushed the indices into the red at close. However, it must be noted that both on Thursday and Friday, commodity stocks witnessed a strong bout of selling on the back of the news that the Chinese economy is slowing down, which was leading to a lower demand for the metals by the dragon, consequently leading to pressure on metal prices. It must be noted that in the international markets, prices of aluminium, alumina, steel and copper have fallen in the region of about 6%-7% over the last fortnight. However, domestic steel manufacturers are contemplating a price hike in the month of May citing higher input costs as the reason. Losers during the week: Aluminium,
In another development during the week, PSU banking sector stocks received a huge drubbing on the back of the news of the RBI tightening the dividend payout norms of banks, capping it at 33.3%. Further, as per the new norms, only those banks with net NPA levels of less than 3% and a risk-weighted assets ratio of at least 11% in the previous two years, can declare dividends. While this move would affect the dividend payout by banks, over the longer-term it would aid the financial strength and viability of the banking sector. Further, we feel that as most of the banks have been improving upon their asset quality parameters, this ruling by the RBI may not impact most of the banks in the country as far as their dividend payout policy is concerned. Some key losers.
The results season is largely over and the India Inc. performance scorecard has been nothing less than impressive. However, now that the uncertainty with respect to the government at the Centre has crept in, the index movements would be highly dependant on the remaining 2 exit poll results of May 5 (3rd phase of voting) and May 10 (4th/final phase of voting). And thus, to that extent, the indices would continue to exhibit volatility. Though investor focus will now shift from individual companies to more macro views and the economy as a whole, the uncertainty with respect to elections would continue until the verdict on May 13 is out. However, we continue to remain optimistic of the longer-term prospects of the Indian economy. Happy Investing!
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