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Heavyweights provide strength

May 31, 2003

It was a week dominated by the index heavyweights on the indices. Moreover, amongst index heavyweights, it was primarily the old economy stocks, which continued to rule the indices and provide the much-needed support to the markets. Just to put things in perspective, the top 5 index heavyweights contributed about 82 points to the Sensex of the 131 points gained. The indices remained firm throughout the week and finally closed on decent gains. The BSE Sensex ended the week higher by 4.3% while the Nifty closed higher by 4%. The month of May should give the investors some solace considering the fact that during this month, the Sensex gained 7.5% while the Nifty was higher by 7.8%.

Top 5 weightage stocks on BSE
COMPANY Price on May 23 (Rs)Price on May 30 (Rs)%CHANGE52-WEEK H/L (Rs)
HLL1501584.8%208 / 135
RELIANCE27029910.8%306 / 218
SBI3423523.0%362 / 218
INFOSYS261026722.4%4,873 / 2,420
ITC6776942.4%725 / 590

Banking stocks continued their run on the bourses with majority of the stocks registering gains over the week. However, during the week, there was volatility witnessed among these stocks, which was due to the uncertainty, or rather the non-clarity, of the issue of return of capital to the government by some banks. While there have been contradicting statements from the government as far as the acceptance of return of equity by banks is concerned, the final statement on Friday indicated that the government will not take back capital at par from PSU banks. On the other hand, these banks as yet, do not seem to be ready to pay back capital at a premium to the government, as it will eat into their reserves. Some of the banks, which are planning to return the equity, include Andhra Bank, BOB, PNB and Oriental Bank of Commerce. The government’s stand is likely to have some impact on these banking stocks next week.

Top 5 gainers over the week
COMPANY Price on May 23 (Rs)Price on May 30 (Rs)%CHANGE52-WEEK H/L (Rs)
BSE-SENSEX 3,0503,1814.3%3,417 / 2,828
S&P CNX NFTY 9681,0074.0%1,106 / 920
HFCL223142.5%75 / 11
IDBI253439.0%36 / 15
SHREE RAMA MULTI7827.1%32 / 4
STERLITE OPTICAL303826.3%124 / 25
LIC HOUSING FIN.8911125.5%113 / 57

Petrochemical stocks were in the limelight throughout the week, with Reliance being a key gainer in the lot. A primary cause for the optimism towards the sector since the last few months has been the upturn in the petrochemical cycle. Good results announced by BPCL during the week buoyed sentiments regarding the refinery sector. Further, with the government announcing that the divestment process of the two oil-refining majors, HPCL and BPCL, would be completed by the end of the current fiscal and of certain others like NALCO and SCI within a few months, PSU stocks also were favoured during the week.

Top 5 losers over the week
COMPANY Price on May 23 (Rs)Price on May 30 (Rs)%CHANGE52-WEEK H/L (Rs)
NOVARTIS270228-15.4%286 / 201
TATA INFOTECH135121-10.9%268 / 119
BANK OF BARODA129117-9.5%141 / 44
MASTEK277257-7.5%615 / 249
ADANI EXPORT179166-7.0%201 / 118

However, the story does not end here. International investors have also been finding value in Indian equities. This is evident from the fact that FII’s have invested about Rs 37 bn in the 5 months of the current year 2003, which is almost equal to the total FII investments in the whole of 2002. We had and continue to support the fact that Indian equities are attractively valued (11.7x) and will provide good returns over a long-term horizon.

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