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Correction continues

Sep 20, 2003

It was yet another week of losses on Dalal Street, which makes it two in a row. These losses came in after seven straight weeks of gains on the bourses. In the last two weeks alone the Sensex and the Nifty have already retraced by about 3.5% and 5.5% respectively. This week, the tally was that the Sensex lost 2.1% while the Nifty lost 3.6%.

The biggest news of the week was the Supreme Court verdict over the divestment issue, which came as a major setback to the government's entire divestment process. This is because the Supreme Court stayed the divestment of HPCL and BPCL stating that Parliament's approval is required before the companies could be divested. It also asked the government to stop its due diligence process. It must be noted here that the litigation was filed against the divestment process on the grounds that since these divestment candidates were nationalized after an approval from the Parliament, the divestment of the same should adopt a similar procedure. This news had a severe negative impact on stock prices of companies, which are on the government’s divestment list. The key losers during the week included HPCL (18%), BPCL (8%), SCI (8%) and Nalco (9%). It must be noted here that the divestment of Nalco had already been postponed earlier until after elections.

Top 5 gainers over the week
COMPANY Price on September 12 (Rs)Price on September 19 (Rs)% CHANGE52-WEEK H/L (Rs)
BSE-SENSEX 4,3064,217-2.1%4,474 / 2,828
S&P CNX NIFTY 1,3721,322-3.6%1,431 / 920
SAW PIPES17720616.1%220 / 55
INDO RAMA SYN.576413.2%66 / 25
STERLITE IND.51557110.7%603 / 135
CUMMINS INDIA80879.2%89 / 45
SESA GOA LTD.2562747.0%300 / 57

Among other news for the week:

  • HCL Tech lost significant ground post its 4QFY03 and FY03 results. The company has reported a dismal performance. While its topline grew by a marginal 1%, which was more due to inorganic growth, a substantial other income component bloated the bottomline. For detailed results read: HLC Technologies: Poor show! However, software majors closed the week with gains. Some key gainers.

  • Steel companies hiked hot-rolled coil (HRC) prices this week, which is a likely follow-up of the rise in international steel prices that has been triggered by increased demand from the US, European and Chinese markets. Though we expect steel prices (across categories) to peak by the end of FY04, demand would continue to be robust mainly driven by growth in infrastructure and housing sectors. Steel stocks closed largely in the positive over the week. Some key gainers.

  • In another divestment related news, the disinvestment of National Fertilisers Limited (NFL) was deferred by at least two years. Bids received below the reserve price set by the government, was the major reason behind this decision. This affected sentiments towards fertiliser stocks, which closed the week largely in the red. Some key losers.

Top 5 losers over the week
COMPANY Price on September 12 (Rs)Price on September 19 (Rs)% CHANGE52-WEEK H/L (Rs)
HPCL424349-17.8%449 / 167
IOC401337-16.1%415 / 132
HCL TECH197166-15.8%228 / 118
VIDEOCON INTL.70 60 -14.3%75 / 21
KOCHI REF.158137-13.3%173 / 36

The next week could be marred by utmost caution, with two weeks of losses at the back of every investor’s mind. Not to forget the volatility being witnessed in the markets. While correction is taking place in the markets, it is anyone’s guess, whether we have seen the last of it. It is time to introspect and once again assess one’s investment objectives and horizon.

However, one factor, from which the investors can take solace from, is the continued inflow of FII money into the markets. It must be noted that despite the correction witnessed last week, FIIs pumped in Rs 10 bn. This trend continued in the current week also, as the FII community invested close to Rs 7 bn. This move by FIIs further re-affirms the faith in Indian equities. Whatever the short-term may have in store for the ‘traders’, for long-term investors, the markets have been consistently providing opportunities to build on their portfolios. Happy investing!

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