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Looking forward to next week

Jul 5, 2003

This week was different as regards the movement of the indices. Oh no! They did not close the week in the negative, but yes, the gains were not as enthusing as were witnessed in the last two months. Both, the BSE Sensex and the NSE Nifty notched up gains of 1.1% over the week. This is relatively weak considering the 2%-3% weekly gains that were seen in the last two months. Another change observed on the bourses this week was the fact that unlike the previous weeks, wherein every fall in the indices, attracted investors, this week it was the other way round wherein at every rise, profit booking was seen. However, the bottomline is that the markets still managed to hold fort.

Top 5 gainers over the week
COMPANY Price on
June 27 (Rs)
Price on
July 4 (Rs)
% CHANGE 52-WEEK H/L (Rs)
BSE-SENSEX 3,583 3,622 1.1% 3590 / 2828
S&P CNX NIFTY 1,126 1,138 1.1% 1,127 / 920
BURROUGH WEL 316 448 41.4% 490 / 185
KINGFISHER PROPERTIES 22 29 30.5% 165 / 15
CADILA HEALTHCARE 147 191 30.2% 205 / 110
GERMAN REMEDIES 230 291 26.5% 307 / 194
INDO RAMA SYN 31 39 25.6% 40 / 23

Pharma stocks were in the limelight this week. As the pharma story seems be to unfolding, investors are realizing the growth potential of the industry. Optimism for the sector stems from the fact that India is likely to become an outsourcing hub soon. With increased competition from generics, MNC pharma majors will be looking at reducing their manufacturing costs in order to survive in the market and with India having USFDA approved manufacturing plants, our country would be an ideal outsourcing destination. Moreover, Indian pharma companies have shown their competitive strengths as they increasingly capture generics markets internationally.

Top 5 losers over the week
COMPANY Price on
June 27 (Rs)
Price on
July 4 (Rs)
% CHANGE 52-WEEK H/L (Rs)
EXIDE INDUSTRIES 138 83 -40.1% 155 / 69
CMC LTD. 479 429 -10.4% 627 / 361
EIH ASSO. HOT 16 14 -9.3% 19 / 7
INDIA CEMENTS 26 24 -9.1% 33 / 13
HIND LEVER CHEM 203 186 -8.4% 208 / 142

The fall in Exide Industries stock price is due to it going ex-bonus. The company had declared bonus shares in the ratio of 1:1, i.e. one bonus share for every share held and the allotment is due next week. Also, India Cements was amongst the top losers this week. This was primarily due to another year of disappointing results declared by the company. The company has reported a net loss of Rs 2 bn on the back of a significant 16% fall in topline. A drastic fall in realisations as well as a considerable rise in interest expenses has taken a toll on both the topline as well as the bottomline of the company in FY03.

For detailed results: India Cements

One sector, which seemed out of favour this week, was the software sector. The key reason for this could be the fact that investors are exercising caution before tech bellwether, Infosys, declares its results on July 10. The carnage seen on the bourses last time when the software major declared its 4QFY03 & FY03 results and gave a much below than expected guidance for the future, led to the de-rating of the entire software sector. Infosys alone lost 40% of its market capitalisation in just 2 trading sessions. However, this time around, investors seem a little bit more cautious.

Key gainers across sectors over the week
COMPANY Price on
June 4 (Rs)
Price on
July 4 (Rs)
% CHANGE
BANKING
ORIENTAL BANK 129 162 25.0%
SBI 358 387 8.2%
CEMENT
ACC 148 169 13.8%
GUJARAT AMBUJA 183 204 11.6%
PHARMA
DR.REDDY 929 1170 25.9%
RANBAXY 676 834 23.4%
ENERGY
HPCL 317 358 12.8%
BPCL 266 291 9.6%

We are once again approaching the results season and next week will be very crucial for the Indian indices and moreso, for the software sector. All eyes are set on July 10, when Infosys declares its results, which will decide the fate of the sector, at least in the near-term. Any positive indication from the software major could set the momentum going again for the software sector. However, the strengthening rupee (currently at its 32-month high) continues to be a threat for the topline of software majors. As far as the overall market is concerned, investors can take solace from the fact that this time around, buying has not been restricted to a particular sector (see table 'Key movers across sectors'), but has rather been more broad-based. But, to sum it all up, apart from the volatility likely to be witnessed next week, investors should exercise caution for the near-term as the markets have had a huge run up in the last 2-3 months and hence, profit booking could be seen at higher levels. However, the long-term India Inc. growth story remains intact.


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