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A good week… - Views on News from Equitymaster
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  • May 3, 2003

    A good week…

    After three weeks of losing streak, indices managed to close on a positive note. The BSE Sensex and the Nifty were higher by 1.5% each. The week was shorter owing to the midweek holiday for Labour Day. Going by the buying interest in key old economy stocks, it seems that investors are realizing that there is sufficient value at the current juncture. On all the trading days, indices closed higher.

    Indices began the week on a positive note with buying interest in banking and old economy stocks. The run up in banking stocks can be divided into two broad phases. One, before the announcement of the Monetary Policy fuelled primarily by expectations of reduction in bank rate. Second, post the announcement of the bank rate and cash reserve ratio (CRR) reduction. A cut in bank rate reduces the yields. But at the same time, price increases due to the inverse relationship. Given the large exposure of banks to G-sec, which is estimated at around 40%, banking majors could benefit. Impressive results from select old economy stocks also fuelled optimism.

    Top 5 gainers over the week
    COMPANY Price on Apr 25 (Rs) Price on May 2 (Rs) %CHANGE 52-WEEK H/L (Rs)
    BSE-SENSEX 2,924 2,967 1.5% 3,478 / 2,828
    S&P CNX NFTY 924 938 1.5% 1,137 / 920
    KOCHI REFINERIES 45 57 25.9% 69 / 36
    ORIENTAL BANK 75 91 22.2% 92 / 39
    HDFC 300 359 19.9% 394 / 289
    CHENNAI PETRO 32 38 19.0% 38 / 25
    TV 18 65 75 15.5% 111 / 49

    On Tuesday, RBI announced the Monetary and Credit Policy. As expected, a 25 basis points reduction was announced in both the bank rate and the CRR. Barring ICICI Bank and Centurion Bank, all banking stocks registered gains.

    Top 5 losers over the week
    COMPANY Price on Apr 25 (Rs) Price on May 2 (Rs) %CHANGE 52-WEEK H/L (Rs)
    HCL TECH 157 136 -13.4% 257 / 128
    FINOLEX CABLES 86 77 -11.4% 168 / 76
    KINGFISHER PROP. 18 16 -10.3% 165 / 15
    CIPLA 701 632 -9.8% 1090 / 561
    ICICI BANK 132 122 -7.7% 165 / 109

    Kochi Refineries was the top gainer amongst the ‘A’ group stocks. The company posted strong topline and bottomline growth. While the topline increased by 59% and the bottomline grew by 560%. The surge in returns on the refining margins was a major contributor to the significant growth. On the other hand, pharma major, Cipla, was among the top 5 losers list this week. It reported a marginal 2% dip in income from operations, but net profits shrunk by over 24% during the quarter. The company's operating margins nearly halved in 4QFY03, due to a flattish sales growth.

    Though indices gained in the last week, sentiment continues to remain cautious amidst sector specific buying interest. Activity was concentrated around result-oriented stocks. Major companies like HCL Tech, Zee Telefilms, Cipla, Grasim, Ranbaxy and ACC announced their results.

    If one notices the Foreign Institutional Investors’ investment trend for the month of April 2003, it can be clearly seen that FII inflows picked up in the second half of the month. FII’s have pumped in over Rs 4.5 bn in the last couple of weeks alone. This further cements the fact that there is value in Indian equities and foreign investors seem to be realizing this fact. It is time that Indian investors, too, realise the same. Though there could be glitches in the near term, it is a good time to build a portfolio of quality stocks.



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