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Bear scent felt

Nov 8, 2003

It was yet another week of significant volatility on the bourses amidst which the indices managed to close the week in the positive with the Sensex having gained 1.3% while the Nifty closed with gains of 2.3%. Apart from weakness in index heavyweights, selling pressure was witnessed across sectors, as bears seem to have resurfaced. However, thanks to the gains made on the first two trading days of the week, the indices closed with net gains.

The markets opened the week on a euphoric note with the indices gaining about 3% on Monday alone. It was a day of merry-making at the bourses as the Sensex crossed the 5,000 levels for the first time since April 2000 and the Nifty crossed over the 1,600 levels. This was followed by another positive day on Tuesday, albeit the gains were relatively subdued. In fact the seeds of the weakness to be followed were sown on Tuesday itself when the markets slipped in the last half-an-hour of trade, after achieving new 52-week highs and crossing the 5,100 levels on the Sensex for a brief period. The trading pattern over the next three days was similar in the sense that on all three days, though the indices opened on a positive note (higher than previous close), they always failed to hold ground and soon dived into the negative territory.

Top 5 gainers over the week
COMPANY Price on
October 31 (Rs)
Price on
November 7 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
BSE-SENSEX 4,907 4,972 1.3% 5,135 / 2,904
S&P CNX NIFTY 1,556 1,592 2.3% 1,630 / 920
DSQ SOFTWARE 6 9 47.7% 24 / 5
SILVERLINE TECH. 5 7 41.4% 32 / 4
KINGFISHER PROP. 21 28 31.8% 42 / 15
MCDOWELL 47 62 31.3% 64 / 33
STERLITE IND. 892 1,169 31.0% 1,169 / 135

The correction was more prominent on the benchmark index like the BSE-30. The other broader indices like the BSE-100, BSE-200 and BSE-500 displayed relatively higher resilience towards the bears, which is evident from the chart above. This was in line with our expectations, which we had also mentioned in our article: Markets India amongst the top on October 29, 2003, wherein we had mentioned, "FIIs are the major drivers of the current rally. And now from hereon, as the universe of stocks gets smaller owing to the already high ownership, this investor class would find it increasingly difficult to find stocks attractive enough to invest in amongst index stocks. This might force them to look at stocks outside the BSE-30 and the NSE-50 more frequently, which could provide them with better growth".

Top 5 losers over the week
COMPANY Price on
October 31 (Rs)
Price on
November 7 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
MADRAS CEMENTS* 6203 711 -88.5% 7,050 / 708
CIPLA 1,299 1,150 -11.4% 1,320 / 561
OBC 255 238 -6.9% 270 / 41
SHREE RAMA MULTI 5 5 -6.8% 15 / 4
TITAN IND. 119 112 -6.1% 124 / 50
* Rs. 100 face value split into 10 shares of Rs. 10 each

Now, let us look at some important news, which characterised the current week: ws, which characterised the current week:

  • The most important news of the week was the announcement of the mid-term review of the Monetary and Credit Policy for 2003-04 by the Reserve Bank Of India (RBI), wherein the bank rate, repo rate and the CRR were kept unchanged, much against market expectations. The central bank, however, sounded much optimistic about higher GDP growth and lower inflation for 2003-04. The RBI cited improved global and domestic economic situation for its current stance and projections for the future. However, no cut in rates affected sentiments towards the banking stocks, which had made huge gains in the recent past on their G-sec portfolios owing to continuous fall in interest rates. Some key losers

  • The week also saw some strong October 2003 sales numbers being reported by auto majors of the likes of Maruti (sales up 35% YoY), Tata Motors (sales up 39% YoY) and Hero Honda (sales up over 50% YoY). Among other auto news, Tata Motors, India's largest commercial vehicle maker, signed a MoU with the South Korean Daewoo Commercial Vehicle Company to buy out the latter for a consideration of US$ 118 m. This acquisition is likely to help the company to expand its product line and penetrate the Southeast Asian commercial vehicles markets. However, the sector displayed a mixed trend this week. Some key gainers

  • Shipping stocks were in significant demand this week. Expectations of a draft legislation for the replacement of corporate tax with tonnage tax by the end of this month fuelled buying in the sector. This is good news for shipping companies, as it will bring the taxes in line with global tax levels of 1% - 2% from the existing 35%. Some key gainers

  • Cement stocks were also in demand this week. With the end of the monsoon period, the demand for cement picks up and activities, which had been stalled or slowed down owing to monsoons, get back on track. A hike in prices follows a pick up in demand and this improved investor sentiments towards the sector. Some key gainers

Despite the volatility and temporary weakness in the markets, going forward the Indian markets continue to look promising and as such, investors should consider market corrections as opportunities to build strong portfolios consisting of fundamentally sound companies with the potential to deliver over a period. We continue to believe that Indian equities are a 'good long-term' play and India is well placed to show encouraging growth going forward, which is likely to lead to handsome returns for investors. Happy Investing!

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