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Bear hug

Oct 25, 2003

Equitymaster wishes all its readers a very Happy Diwali and a Prosperous New Year!

The week gone by was characterized by intense selling pressure and intra-day volatility as bears decided to play havoc on the bourses before Diwali. But thanks to some very smart pull back on the final trading day of the week, which improved the situation on the bourses from ‘very bad’ to just ‘bad’. For the week, while the Sensex lost 3.5%, the Nifty closed lower by 4% week-on-week.

The indices opened the week on a marginally positive note but immediately decided that it was not the course they wished to follow for the week. Soon they plunged into the negative territory on the back of all round profit booking. The index heavyweights also failed to provide any support as they too came under the control of the bears. Tuesday, Wednesday and Thursday were nothing different as the bear party continued and they seemed to show no signs of tiring. However, Friday saw the markets freeing themselves from the bear hug as they made a smart comeback after touching intra-day lows of 4,600 on Friday on the Sensex. The indices shrugged off the sell-off nightmare of the previous 4 trading sessions as they headed straight up to close above 4,750 levels on the Sensex that is an intra-day recovery of over 150 points!

Top 5 gainers over the week
COMPANY Price on
October 17 (Rs)
Price on
October 24 (Rs)
BSE-SENSEX 4,931 4,757 -3.5% 4,951 / 2,828
S&P CNX NIFTY 1,569 1,506 -4.0% 1,574 / 920
TITAN IND. 99 111 12.1% 120 / 50
EIH LTD. 225 244 8.7% 265 / 154
EIH ASSO. HOT. 21 23 8.5% 28 / 7
ESAB INDIA 58 62 7.9% 64 / 28
INDO RAMA SYN 74 79 7.6% 85 / 25

However, it must be noted that the markets had been anticipating a correction for some time now. The last time the markets had had a significant correction was just last month, in mid-September, when the markets lost about 4% from 4,400 levels to 4,200 levels. However, after that, the markets rocketed to 4,900 levels in a single breath, a gain of almost 17% in just 4 trading weeks! However, the current weeks correction of about 4% again was seemingly due to factors like the huge open positions in the derivatives segment, which is estimated to be to the tune of Rs 100 bn, while the derivatives settlement is due on Thursday. Moreover, with higher trading margins imposed, investors seemed in favour of booking some profits before Diwali. However, fortunately, the sharp bounce back on Friday seems to have marked the beginning of Diwali celebrations on Dalal Street.

Top 5 losers over the week
COMPANY Price on
October 17 (Rs)
Price on
October 24 (Rs)
ARVIND MILLS 53 46 -14.3% 57 / 19
RAYMOND LTD. 166 144 -13.2% 173 / 83
ESCORTS 62 55 -11.7% 68 / 35
STERLITE OPTICAL 58 52 -11.2% 73 / 25
HFCL 16 14 -11.1% 45 / 11

The current week also saw the declaration of some key results from India Inc. as, once again, majority of them managed to live up to the market expectations. However, the good results did not reflect in the stock prices as the markets were in the midst of a sell-off. Some of the key results declared this week included Digital, Bharat Forge, Satyam, Bajaj Auto, IDBI Bank, Raymond, ACC, Tata Power, Ranbaxy and Hindalco.

For more results, kindly click: Latest Results: Track corporate India

While the results season will only get more hectic next week, with some key results of the likes of Ashok Leyland, ONGC, Dr. Reddy’s, BHEL, ITC, Tata Motors, SAIL, Tisco, HPCL, HLL, SBI, ICICI Bank, GAIL, Cipla, L&T, BPCL and Maruti, it must be remembered that quarterly results are short-term in nature and we feel that the trend emerging from quarterly results should be taken as only a reference for longer-term investment decisions and one or two quarters of below average performance should not make a difference. Thus, the movement of the indices in the final week of October would be largely determined by the ensuing results. Happy Investing!

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