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Quarterly results: The likely trigger? - Views on News from Equitymaster
 
 
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  • Sep 30, 2000

    Quarterly results: The likely trigger?

    In the last couple of days the markets have been moving in a narrow trading range between 4,020 and 4,060. The lacklustre movement was largely due to fears of a hike in petroleum product prices. The volumes in the markets also declined substantially with lack of institutional interest. The undertone in the market was weak in the absence of any positive news.

    During the month, FIIs were net sellers to the tune of Rs 270 m. On the other hand domestic mutual funds bought the securities worth Rs 220 m in an otherwise falling market. The indices (both BSE and NSE) lost around 7% since the beginning of the month.

    The markets witnessed a mixed trend in the last week with persistent uncertainty. Technology stocks reported some recovery due to bargain buying by local funds. Pharma shares were battered badly following the news of price cuts in some of the drug formulations by NPPA. FMCG majors also lost substantially due to concerns about their sluggish topline growth in the quarter ended September 30, 2000.

    The petroleum ministry has finally announced a hike in petro product prices in order to contain the ballooning oil pool deficit. Retail prices of kerosene have been hiked by 50%, petrol by 8-10%, diesel by 17-20%, LPG prices by 18-20% and aviation turbine fuel (ATF) by 20%. The government has decided not to pass the entire burden of the rising oil prices to the consumer. Hike in the prices of petro products is expected to increase inflation by 2-3% from the current 6%.

    The GDP growth rate slipped to 5.8% during the period April June 2000 from 6.9% in the corresponding previous quarter. The slow down in the industry growth is witnessed across all the sectors barring sectors like mining & quarrying, electricity, gas & water supply and trade hotels, transports & communication. As per the survey conducted by CII (Confederation of Indian Industry) key industrial sectors including medium and heavy commercial vehicles, cats, steel, cement and fertiliser have reported a low production growth rate during the first half of the current year. However the exception to the slowdown rate are personal computers, software, cellular services and consumer durable which reported a positive growth rate. The negative growth rates in the manufacturing and commodity sectors could result in weakening sentiment in the so called old economy stocks.

    Industry April-June
      FY00 FY01
    Agriculture 4.9% 2.5%
    Mining -2.1% 5.0%
    Manufacturing 6.1% 5.5%
    Electricity, gas & water supply 6.0% 6.6%
    Construction 8.8% 7.2%
    Hotels, transport & Commn. 6.1% 7.7%
    Financing, insurance and real estate 10.0% 8.3%
    Community, social and personal services 11.2% 6.9%

    The market seems to have discounted the adverse news. The government has taken a hard decision on the front of petro prices. The only positive trigger for the market to rise is the quarterly results of the corporates. Here also eyes are on performance of technology companies, which are widely anticipated to continue their trail-blazing path. But the continuous buying interest shown by mutual funds (net investment of Rs 3.4 bn in the last one-week) confirms the presence of bullish sentiment in the markets. Whether the markets will finally reflect this bullishness however is another matter?

     

     

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