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Looking for warmth - Views on News from Equitymaster
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  • Jul 20, 2002

    Looking for warmth

    It's freezing out there! You don't believe us. Well, the Dow lost 7.7% this week and the NASDAQ 4%. In the last two weeks, both global benchmark indices have lost 15% and 9% of market cap respectively. Infact, the NASDAQ is hovering at levels seen in April 1997 and the Dow is at 4-year lows. The BSE Sensex too, lost over 2% during the week.

    The Sensex has seen only 5 stocks gaining ground in the past week. These are MTNL, Glaxo, Dr. Reddy, Ranbaxy and Bhel. So effectively, it has been either PSUs or pharma counters that have emerged stronger over the week. The reasons for this are not difficult to decipher.

    MTNL seems to be gaining ground based on its progress in cellular telephony. It had an estimated 110,000 clients by end of FY02. Besides, the recent ruling by TRAI on the WiLL front has benefited MTNL in a large way. The company has around 27,000 CDMA subscribers. On the other hand, Bhel with a huge order backlog of Rs 120 bn in April 2002, is giving big signals of a continuous recovery in performance.

    Ranbaxy's stupendous 2QFY03 numbers seemed to have inculcated a buying spirit in domestic pharma counters. The company declared 46% topline growth and a huge 190% bottomline growth during the quarter. Operating margins improved YoY by approximately 500 basis points.

    If we take a look at the top losers this week, two wheeler majors Hero Honda and Bajaj Auto head the list. Both seem in a profit-taking mode. Also, the spat in the Bajaj family may be affecting sentiment on the Bajaj Auto counter. The list also includes 3 software stocks, almost all cement majors, and the big 3 i.e. Reliance, RPL and HLL.

    The monsoon scare was one of the key spoilsports for the Sensex pivotals especially cement counters and HLL. The Reliance group getting bad press over some accounting irregularities largely meant that the Sensex would have a dull week.

    Luckily the sage from Omaha, Mr. Warren Buffet, has taken his first steps towards exposure to technology. That should generate some heat in the shivering Wall Street. For the Indian bourses, the monsoon scare seems to be waning. But weakness in Wipro may dog the Nifty in the week to come.



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