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Bull blast…

Aug 30, 2003

…or bomb blast? Well, it seemed like more of the former than the latter. At least that was what was visible on the bourses this week…once again! From the way the markets behaved, it was like that there was no stopping for the bulls. The markets continued to gain ground and closed higher. While the BSE Sensex gained 2.9%, the NSE Nifty notched gains of 3.5%.

The markets began the week on a strong footing only to collapse like a pack of cards on the news of two bomb blasts that rocked Mumbai. The BSE Sensex that was trading in the positive till the ill-fated blasts at about 1 pm, tumbled about 180 points (or 4%) within a short span of an hour. Roumours of subsequent blasts played further havoc as it reminded every Indian of the serial bomb blasts that brought Mumbai to a standstill, a little over a decade ago.

Top 5 gainers over the week
COMPANY Price on
August 22 (Rs)
Price on
August 29 (Rs)
CHANGE
%
52-WEEK
H/L (Rs)
BSE-SENSEX 4,1254,2452.9%4,278 / 2,828
S&P CNX NIFTY 1,3111,3573.5%1,366 / 920
UNITED PHOS.28238135.5%381 / 114
KOCHI REF.12516430.7%173 / 36
NIRMA LTD.34844026.3%460 / 220
POLARIS11614222.6%221 / 95
AUROBINDA PHARMA38346421.4%487 / 201

But then…that was it. Investors accepted the blasts with a ‘one more’ kind of attitude and went on with the usual activity. In fact, market players saw a buying opportunity when markets crashed on Monday, which was evident from the fact that the markets recovered some of the lost ground in the closing hour of trade. Moreover, Tuesday saw the markets not only recoup all the losses seen on the previous day, but they managed to notch additional gains. Then the next three days was practically bulls on the bourses, though markets took a breather on Thursday by closing only marginally in the positive.

COMPANY Price on
August 22 (Rs)
Price on
August 29 (Rs)
CHANGE
%
52-WEEK
H/L (Rs)
ZEE TELE116102-11.8%124 / 60
TATA FINANCE4743-8.3%62 / 14
MTNL134123-8.0%137 / 81
HFCL29 27 -7.0%58 / 11
GSFC2927-7.0%30 / 14

Not let us look at some stock and sector specific stories of the week. To begin with the big story, the divestment process of the PSU oil major has flagged off. The due diligence process of the company started on Thursday with Reliance being the first company to visit HPCL, though only after some protests from the HPCL staff. Moreover, with reports that the golden share clause, which would have given the government the power to veto any board decision, might be omitted in the transaction document for strategic sale, further cheered sentiments towards the stock. The stock gained 7% over the week. The trickle down effect of the same was also seen on BPCL’s stock (up 6%), which is the next candidate to be divested, albeit via the IPO (domestic and international) route.

Among other snippets for the week:

  • Pharma stocks gained significant ground this week on the back of the news that India, along with South Africa, Kenya and Brazil has entered into an agreement with the US to provide low-cost medicines to poor countries. However, the agreement failed to get approval by the members of the WTO and this news came after the markets closed on Friday. This agreement was aimed at relaxing patent regulations on some drugs, allow low-cost producers to export generic versions of branded medicines to poor nations. This agreement would have benefited the developing nations involved. Pharma stocks closed the week with strong gains, the key gainers being Cipla (12%), Dr. Reddy's (5%) and Ranbaxy (13%), Glaxo (7%), Aventis Pharma (5%) and Sun Pharma (5%).

  • The uncertainty over the implementation of Conditional Access System (CAS) took its toll on the Zee Telefilms stock, as the phased rollout of CAS seems to have taken a backseat. While it has been stalled in Delhi for sure, the rollout in Mumbai and Chennai is also likely to be delayed. And once again, thanks to our good old politics! The stock lost 12% over the week.

  • Maruti Udyog, whose stock got listed on the bourses early July, entered the MSCI India Index on Friday. It must be noted that MSCI country indices are widely followed by fund managers around the world. The Maruti stock closed with gains of about 3% this week.

  • Steel stocks witnessed significant volatility during the week, finally closing the week mixed. In fact, steel stocks perked up on Friday on the back of news that the US government is planning to roll back additional import tariffs imposed in March 2002 on galvanised and cold-rolled steel. Currently, the duty imposed is 30% on these two categories of steel. The tariff reduction will lead to higher exports for Indian steel producers, thus getting them better realisations, which in turn may result in a further improvement in margins. In the sector, only Jisco (6%) and SAIL (2%) managed to close the week with gains.

To conclude, markets have continued their run upwards unabated, without being deterred by any obstacle that may come in its way. The week gone by was a good example of the resilience being seen on the bourses and the prevalent bullishness. However, now a serious word of caution should be that the Indian indices have gained over 45% in this bull-run since the beginning May this year. And mind you, this has been in almost a single breath, without any ‘significant’ correction being witnessed in the last four months. Well, the bulls may argue here that this is what a bull-run is all about, but then we must take a cautious stand, sit back a while and think – do the current fundamentals justify a further rise or has everything been factored into the markets. Anyways, till next week, happy investing and may God bless the souls of the blast victims, and the families who lost their loved ones on the ill-fated day, August 25, 2003!

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