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And the story continues... - Views on News from Equitymaster
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  • Jun 12, 2004

    And the story continues...

    Indian stock markets continued their poor streak this week, losing by about 1% each, after a small perk up witnessed during the previous week. While the initial half of this week was characterized by volatility, the second half (barring Friday) was largely lacklustre with the indices restricting their movements within a narrow range. With this week's fall, the indices have now shaved off nearly 20% of their market capitalization over the last 7 weeks. Global uncertainties like the effect of high crude prices on inflation (and consequently economic growth) along with domestic concerns with respect to continuation of reforms continued to play heavy on the minds of investors as they refrained themselves from the markets.

    After last weeks 1% gains, the Indian stock markets opened strong and continued to head northwards for most part of Monday's trading before a sharp bout of profit booking erased almost half the gains garnered by the indices during the day's trading. Similar to this, alternate bouts of selling and buying was witnessed the following day with the indices finally ending the day with respectable gains. The next two days saw rather lacklustre trading before bears took charge and pushed the indices lower into the red on Friday. The decline in the markets after last week's gains seemed primarily in the nature of profit booking, a trend similar to that being witnessed over the last few weeks, which has witnessed selling at every rise, thus continuing to put pressure on the indices. With no trigger to sustain the market momentum and uncertainty with respect to the continuation of reforms looming large, which would get clarity only post the Budget early next month, investors preferred to keep their distance from the markets.

    Key gainers over the week (NSE-50)
    COMPANY Price on June 4 (Rs) Price on June 11 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BSE-SENSEX 4,889 4,833 -1.2% 6,250 / 3,288
    S&P CNX NIFTY 1,521 1,508 -0.8% 2,015 / 1,035
    DABUR 72 83 16.0% 98 / 44
    MTNL 117 130 11.0% 166 / 92
    BRITANNIA 578 620 7.3% 786 / 512
    BHARTI TELE 133 142 7.0% 189 / 36
    HPCL 327 348 6.5% 542 / 265

    While the week was largely lacklustre from the stock market perspective, there was some action on the corporate results front, which included results from the (now) engineering major, L&T, oil major, IOC, Ashok Leyland, Voltas and Tata Chemicals. Among other corporate action, the software arm of Tata Group and India's largest software exporting country, Tata Consultancy Services (TCS), has filed its prospectus with SEBI for its IPO.

    The effect of this was visible on two fronts. One, by virtue of the fact that many of the Tata group companies have a holding in TCS, there was considerable strength witnessed amongst some Tata stocks during Friday's trade despite the selling pressure seen on the bourses. Some of the group companies that have a stake in TCS include Indian Hotels, Tata Tea, Tata Chemicals, Tata Motors and Tata Power. The other effect of this was seemingly witnessed on software stocks on Friday, which remained out of favour on Friday over concerns that large institutional investors would now consider re-jigging their allocation within the software sector in order to make way for this new software entrant.

    Key losers over the week (NSE-50)
    COMPANY Price on June 4 (Rs) Price on June 11 (Rs) % CHANGE 52-WEEK H/L (Rs)
    PNB 278 253 -8.9% 397 / 140
    TISCO 315 290 -8.1% 490 / 147
    OBC 235 216 -7.9% 367 / 120
    HLL 139 129 -7.0% 245 / 115
    ZEE TELE 134 125 -6.3% 175 / 83

    Going forward, with the markets eyes set on the Budget to provide the trigger, we believe that post the sharp correction witnessed over the last couple of months, valuations have almost gone back to square one and started looking attractive from a long-term perspective. Thus, rather than waiting for the markets to fall further, one must cash in on the weakness and start building a diversified portfolio of companies that have competent management and a track record of consistently high growth.



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