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One-way traffic! - Views on News from Equitymaster
 
 
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  • Sep 6, 2003

    One-way traffic!

    It was yet another positive week on the bourses. Despite concerns regarding the premise of this rally in the last few days, there seem to be on looking for investors at the current juncture. Though there was some correction witnessed on Wednesday, it was short-lived. While the Sensex closed the week with gains of 2.9%, the Nifty managed to notch gains of 3.1%.

    Software stocks were in the limelight in the week gone by. This is evident from the chart above which shows the BSE IT Index vs the BSE Sensex. The BSE IT Index gained 11% over the week. Some key gainers were Wipro (17%), HCL tech (15%), Satyam (11%), Infosys (8%) and Hughes Software (7%). However, are the recent gains in the software sector justified? For an analysis of the same read:Software: Why the spurt?

    Pharma stocks remained a mixed bag in the current week after the significant run up seen on the bourses over the last couple of weeks. The primary reason for the hype in pharma stocks seemed to be the fact that the WTO members have finally agreed on a draft resolution regarding the licensing of life-saving drugs to least developed countries. However, there is a lack of clarity on this front at this point in time and it remains to be seen how things unfold. For further analysis of the same read:WTO Agreement: The fine print

    Top 5 gainers over the week
    COMPANY Price on August 29 (Rs) Price on September 5 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BSE-Sensex 4,245 4,369 2.9% 4,372 / 2,828
    S&P CNX NIFTY 1,357 1,398 3.1% 1,401 / 920
    EIH ASSO. HOT. 17 22 28.2% 22 / 7
    SESA GOA 210 263 25.0% 269 / 57
    GUJARAT NARMADA 43 54 23.8% 55 / 24
    SUPREME IND. 128 157 22.7% 166 / 75
    Wipro 1,066 1,247 17.1% 1,762 / 791

    As can be seen in the table above, apart from Wipro, another key gainer was Sesa Goa. In fact, steel stocks shot into favour this week again. This is on the back of the news that Nippon Steel of Japan, the world's 3rd largest steel producer (over 30 MT), had disruptions in one of its coke plant, which could affect its steel production in the near-term. However, we feel that the upside for steel prices (up 18%-20% since March 2003) will be minimal. Even if steel prices increase, it will be a temporary phenomenon. The key gainers over the week in the steel sector were Tisco (6%), Jindal Steel (17%) and Sesa Goa (25%). The positive news for the company is that it is the major exporter of coke, the raw material required or steel production.

    Top 5 losers over the week
    COMPANY Price on August 29 (Rs) Price on September 5 (Rs) % CHANGE 52-WEEK H/L (Rs)
    TATA FINANCE 43 38 -11.0% 62 / 14
    IDBI 38 34 -9.8% 51 / 15
    INGERSOLL RAND 299 271 -9.5% 302 / 191
    PENTAMEDIA 12 11 -9.2% 33 / 7
    NIRMA LTD. 440 400 -9.1% 460 / 220

    While the markets have gained strongly (46% since April 2003), there have been increasing concerns regarding the sustainability of the same. We would like to caution investors that in a bull rally, even the most non-fundamental stocks appreciate, sometimes many folds! Investors should keep away from such stocks and rather invest for a longer term in fundamentally sound companies rather than speculating on penny stocks for a quick buck.

     

     

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