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Metallic luster for markets!

Jul 14, 2007

Buoyed largely by metal stocks, the indices gained strongly during the week and closed at yet another highs. For the week ended July 13, 2007, while the 'BSE-Sensex' closed higher by a little more than 2%, gains in NSE-Nifty were a tad lower than 3%.Monday was another landmark day for the 'Sensex', as for the first time ever, the index closed above the 15k mark. The optimism of last week spilled over to Monday, thus leading to the markets trading in the positive zone for the entire day. However, there were no such luxuries over the next two days as investors opted to book profits and take some money off the table. Although bears took center stage here, the declines were rather muted. Bulls were back with a bang on Thursday and the indices, shrugging off a sedate performance from Infosys, advanced strongly over the next two days and thus closed comfortably in the positive. The fact that the global markets remained strong also helped matters.

(Rs m)MFs FIIs Total
6-Jul8,225 31,793 40,018
9-Jul6,902 8,893 15,795
10-Jul6,889 7,021 13,910
11-Jul9,395 3,635 13,030
12-Jul6,928 6,996 13,924
Total38,339 58,338 96,677

As far as the institutional activity is concerned, both the Foreign Institutional Investors (FIIs) as well as the domestic mutual funds remained net buyers and bought stocks worth Rs 58 bn and Rs 38 bn respectively during the week.

IndexAs on July 6As on July 13% Change
BSE METAL10,775 12,001 11.4%
BSE PSU 6,800 7,099 4.4%
BSE SMLCAP 7,904 8,216 3.9%
BSE AUTO 4,903 5,058 3.2%
BSE MIDCAP 6,621 6,795 2.6%
BSE OIL AND GAS 7,621 7,820 2.6%
BSE BANKEX 8,124 8,282 1.9%
BSE HEALTHCARE 3,821 3,849 0.7%
BSE FMCG 1,856 1,864 0.5%
BSE IT 4,951 4,898 -1.1%

On the sectoral indices front, while save for the IT index, all the other indices edged higher, the week clearly belonged to the metal index, which edged higher by an impressive 11%. Such was the optimism for stocks from this sector that out of the top five gainers from the Nifty during the week, metal stocks occupied four positions.

Top gainers during the week (BSE A)
CompanyPrice on
July 6 (Rs)
Price on
July 13 (Rs)
%
Change
52-Week
H/L (Rs)
BSE SENSEX14,964 15,273 2.1% 15,331 / 9,875
S&P CNX NIFTY 4,385 4,505 2.7% 4,514 / 2,878
RAMCO SYSTEMS132 163 23.7%233 / 119
SAIL131 160 21.9%165 / 64
BOI222 269 21.0%274 / 80
CESC LTD391 454 16.1%467 / 248
ADANI EXPORT271 311 14.8% 315 / 102

Auto stocks closed mostly firm for the week with the key gainers being Tata Motors (up 8%) and Maruti (up 4%). Bajaj Auto, India's second largest two-wheeler manufacturer announced its first quarter results during the week. The company has had a bad start to the fiscal FY08. During the quarter, while the company's standalone topline has shrunk by 4% YoY, the damage at the operating level has been much higher with a 330 basis points contraction in operating margins. Fall in bottomline however, has come in at a slightly lower 15% YoY, thanks mainly to the 9% growth in other income and a benign depreciation charge. The company has witnessed a sharp drop in volumes in the domestic market and this in turn affected its financial performance. The stock, however, closed 4% higher for the week.

Top losers during the week (BSE A)
CompanyPrice on
July 6 (Rs)
Price on
July 13 (Rs)
%
Change
52-Week
H/L (Rs)
MPHASIS LTD321300-6.6%340 / 121
IGATE GLOBAL291277-4.8%432 / 145
CASTROL275262-4.6%315 / 162
NOVARTIS379364-4.1%569 / 306
NICHOLAS PIRAMAL295284-3.7%321 / 190

Infosys edged 2% lower for the week. This was on the back of muted results announced by the company for the first quarter of FY08. The company's topline remained flat on a QoQ basis on the back of 1% QoQ growth in blended billing rates and 6.9% QoQ growth in volumes. The operating margins contracted by 3% QoQ. Also, the higher other income (grew 113% QoQ) was offset by higher tax outgo. The company's bottomline fell by 5.6% QoQ and the PAT margin contracted by 1.7% QoQ. The company has added 35 new clients and 3,730 employees during the quarter. The management has revised its dollar guidance upwards but rupee guidance downwards to Rs 40.58 per dollar. Its peers TCS (down 2%) and Wipro (1%) also closed weak.

HDFC Bank also announced its results for the first quarter of FY08. Leading the sector in terms of re-pricing its loan and deposit products has stood the bank in good stead, as it has managed to clock an appreciable performance for the quarter under review. A healthy CASA (current and savings account) mix and little deterioration in asset quality has cushioned the higher provisioning requirements for the bank. The sustenance of high operating costs and tax liability has, however, marginally pared the bank's net profit margins over that of 1QFY07. Despite this, the stock closed 6% higher for the week. Its peers SBI (up 1%) and PNB (up 6%) also closed higher.

With the advent of the next week, the trickle of results will most likely turn into a torrent and in the short term, will mostly dictate which way the markets move next. Although, there are not likely to big disappointments, we believe much of it is already priced into majority of the stocks. Hence investors need to be cautious and should not get carried away by the momentum.

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