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Directionless volatility

May 24, 2003

It was a see-saw week for the indices. They witnessed a lot of volatility throughout the week displaying no definite trend. Both the Sensex and the Nifty closed marginally below last Friday’s levels. Movement of the indices once again displayed signs of confusion and lack of investor confidence. Short-term concerns continue to stay at the top of investor’s minds.

However, one indication, which seems to emanate since the last couple of weeks, is the fact that investors are now looking at old economy stocks as investment options. With the manufacturing sector showing resilience despite poor monsoons last year and rains likely to be normal in the current fiscal, investors are finding value in select old economy stocks. Software stocks continued to be weak on the bourses. With the rupee showing no signs of weakening, concerns over software earnings getting adversely affected ruled strong. Moreover, it seems that the billing pressure (due to sluggish growth in the US) on Indian software companies are here to stay for a while.

Top 5 gainers over the week
COMPANY Price on May 16 (Rs) Price on May 23 (Rs) %CHANGE 52-WEEK H/L (Rs)
BSE-SENSEX 3,057 3,050 -0.2% 3,417 / 2,828
S&P CNX NFTY 973 968 -0.5% 1,106 / 920
IDBI 19 25 29.8% 28 / 15
CHENNAI PETRO 45 57 25.6% 60 / 25
BANK OF BARODA 109 129 18.3% 133 / 44
BATA INDIA 31 37 17.4% 51 / 26
E-MERCK 237 277 17.1% 340 / 217

IDBI was one of the key gainers this week. Sentiments towards the stock perked up primarily on the back of speculation that the Ministry of Finance has given an in-principle approval for the conversion of the financial institution into a bank. Also, another news doing the rounds of markets was the likeliness of the government sanctioning a relief package for IDBI. Among the prominent losers (7 out of the top 10), software stocks dominated the list.

Top 5 losers over the week
COMPANY Price on May 16 (Rs) Price on May 23 (Rs) %CHANGE 52-WEEK H/L (Rs)
POLARIS SOFTWARE 136 115 -15.2% 285 / 108
HCL TECH 142 121 -14.3% 251 / 119
DSQ SOFTWARE 10 9 -14.1% 33 / 7
TRIGYN TECHNOLOGIES 15 13 -13.3% 54 / 10
WIPRO 944 821 -13.1% 1762 / 800

Among other key events during the week, the crucial decision on interest rates for EPF is to be taken by the Employees Provident Fund Organisation. On another front, due to the spectacular run of banking stocks on the bourses, the market capitalisation of banking stocks has surpassed that of the IT stocks. However, we continue to advocate caution while investing, in these sectors. Having said that we continue to believe that Indian equities are a good long-term play and India (amidst global concerns) seems well placed to show encouraging growth going forward, which is likely to lead to handsome returns for investors.

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