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Tottering at the top

Oct 6, 2007

Volatility was the order of the week with markets witnessing curt crashes and swift recoveries. Although bears made their presence felt during the week, with indices closing in the red for two out of four trading session, the bulls weren't complaining as the domestic indices closed the week with gains of 3%. The week began on a shaky note with the BSE Sensex closing marginally higher (up 38 points) after being down more than 100 points in the early trades. The markets remained closed on Tuesday on the eve of 'Gandhi Jayanti'. Wednesday was the day of intense volatility as the Sensex fell to a low of 17,288 just minutes after rallying to a fresh all-time intra-day high of 17,953, just 47 points shy of another milestone of 18,000. However, the index recouped most of its gains in the final hours of trade to close with a massive gain of 518 points. Tata Power (up 14%), Reliance Energy (up 9%) and Suzlon (up 6%) were the key gainers on the NSE. The rest of the week belonged to the bears as the BSE Sensex closed with marginal losses on Thursday and Friday. For the week, while BSE-Sensex advanced by 2.8%, NSE-Nifty closed with gains of 3.3%.

On the institutional activity front, between 7th and 13th September, while Foreign Institutional Investors (FIIs) emerged as net buyers to the tune of Rs 94 bn, mutual funds sold equities worth Rs 7 bn.

(Rs m)MFs FIIs Total
28-Sep312 34,933 35,245
1-Oct(1,278)21,960 20,682
3-Oct(1,021)31,615 30,594
4-Oct(5,325) 5,750 425
Total(7,312)94,258 86,946

On the sectoral indices front, the BSE Oil & Gas Index and the BSE IT Index featured among the key gainers with gains of 5.7% and 2.4% respectively, while the BSE FMCG Index and BSE Bankex lost 2.5% each.

IndexAs on September 28As on October 5% Change
BSE IT4,628 4,740 2.4%
BSE SMLCAP9,100 9,102 0.0%
BSE OIL AND GAS9,562 10,110 5.7%
BSE HEALTHCARE3,784 3,826 1.1%
BSE AUTO5,332 5,366 0.6%
BSE PSU8,202 8,341 1.7%
BSE MIDCAP7,422 7,486 0.9%
BSE FMCG2,161 2,107 -2.5%
BSE BANKEX9,469 9,225 -2.6%
BSE METAL13,945 14,122 1.3%

Now let us have a look at some of the key stock/sector specific developments during the week:

In a bid to strengthen the textile sector that has been going through a tough time due to the appreciating rupee, the textiles ministry has finalised a proposal to set up Territorial Textile Investment and Production Complexes (TTIPC) in the country. These TTIPCs will mirror special economic zones (SEZ) in tax concessions and relaxed labour laws for the units in the region, but would be vastly different in terms of having no need to be geographically contiguous or having no ceiling on its size. Besides, unlike an SEZ, a TTIPC would not distinguish between units engaged in production for domestic market or export. While Arvind Mills and Welspun India advanced by 1% each during the week, Alok Industries lost 4%.

As per leading business news daily, CDMA and GSM operators are getting involved in a new dispute. This pertains to the Department of Telecom (DoT) allowing CDMA-based players to conduct field trials in the 1900 MHz band to establish that mobile services offered in this radio frequency would not impact GSM operations in the 2100 MHz band. GSM-based operators, which have constantly warned that any move to allocate spectrum in the 1900 MHz band to CDMA players would adversely impact their services in the 2100 MHz band, have now complained to the DoT that they have been completely excluded from the planning of the trial. The COAI claim has, however, been hotly contested by CDMA industry body Association of Unified Service Providers of India (AUSPI), which has said that the GSM-based operators were always kept in the loop. At the same time, COAI after studying the methodology to be adopted during the trials has also raised a host of technical issues with the DoT. Telecom stocks closed firm for the week with RCOM (up 10%), Idea Cellular (up 7%) and Bharti Airtel (up 6%) emerging as the key gainers.

Top gainers during the week (BSE A)
CompanyPrice on
Sep 28 (Rs)
Price on
October 5 (Rs)
%
Change
52-Week
H/L (Rs)
BSE SENSEX17,291 17,773 2.8% 17,832 / 12,261
S&P CNX NIFTY5,021 5,186 3.3% 5,212 / 3,516
ADANI EXPORT 557 706 26.6% 660 / 133
JINDAL STEEL5,183 6,469 24.8% 6,510 / 1,661
RELIANCE ENERGY1,206 1,447 20.0% 1,500 / 448
GMDC1,087 1,262 16.1% 1,260 / 333
ISPAT INDUSTRIES28 32 15.6% 30 / 10

Power stocks closed firm with Reliance Energy (up 20%) and Tata Power leading the pack of gainers. Power Grid Corporation of India (PGCIL) made its debut on the markets today, with the stock listing at Rs 85, up 63% from the offer price of Rs 52 per share. The company has raised Rs 29.8 bn through the 573.9 m share issue, which includes a fresh offer of 382.6 m shares and sale of 191.3 m shares by the government .The government's holding in the company has consequently come down to 86.4% from 100%. As a matter of fact, PGCIL is the national carrier of power and by creating a grid it transmits power from surplus to deficit regions. The proceeds from the issue will help fund 15 transmission projects worth Rs 127 bn. PGCIL owns and operates 61,875 circuit kms of transmission lines. The company has inter-regional electricity transfer capacity of around 14,000 MW and plans to scale it up to 37,000 MW over the next few years.

Top losers during the week (BSE A)
CompanyPrice on
Sep 28 (Rs)
Price on
October 5 (Rs)
%
Change
52-Week
H/L (Rs)
NIIT161132-18.2%170 / 40
IDBI156141-9.4%159 / 167
UNITED PHOSPHORUS396361-9.0%400 / 239
DENA BANK6762-8.3%70 / 29
INDUSIND BANK7569-8.2%80 / 37

As expected, markets during the week were primarily driven by the liquidity factor as the FIIs went on a buying binge, counting on a further appreciation in rupee vis-a-vis dollar. Though investors might find this as a reason to cheer, they need to be cautioned about the short-term nature of this 'hot' money. With valuations taking a backseat in this mad rush of capital inflow, we advise investors to concentrate on the fundamental aspect and not get carried away by the one-way movements in the indices.

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