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Bulls embrace markets

Nov 29, 2003

After 3 weeks of lackluster trading (including two weeks of losses), the indices finally managed to, once again, raise their head this week. In the current week, while the Sensex closed with gains of 4.3%, the Nifty gained 4.8%. The heartening factor this week was the fact that unlike in the recent past, the indices showed immense strength while gaining ground and there was relatively lesser volatility compared to what was being observed over the last couple of months.

Sensex heavyweights: Supporting gains
COMPANYPrice on
November 21 (Rs)
Price on
November 28 (Rs)
%
CHANGE
ICICI bank2352506.3%
WIPRO1,4511,5396.1%
RELIANCE4614886.0%
INFOSYS4,6724,9255.4%
HDFC5255525.1%
SbI 4494714.8%
RANbAXY9791,0224.4%
bHARTI TELE82853.7%
Note: The above are NOT the top gainers

before we look at how the markets behaved during the week, it must be noted that it was a shortened trading week on account of the Ramzan Id holiday on Wednesday. Now let us consider the trading week gone by in brief. Last Friday's positive sentiments spilled over to Monday's trading this week as the indices opened on a firm footing and went on to slowly and steadily build on the gains. However, profit booking during the closing hours of trade pushed the indices to close in the negative territory. However, on Tuesday, the markets again opened with a bang and this time, the momentum was sustained throughout the day on the back of all round buying.

Top 5 gainers over the week
COMPANYPrice on
November 21 (Rs)
Price on
November 28 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
bSE-SENSEX4,8395,0454.3%5,135 / 2,904
S&P CNX NIFTY1,5411,6154.8%1,630 / 920
SAREGAMA526526.5%88 / 42
RELIANCE CAPITAL8810621.7%109 / 49
SYNGENTA IND.17020721.5%215 / 112
PSI DATA SYS.708420.8%108 / 40
GSFC344120.2%44 / 14

Despite Wednesday's holiday, the positive sentiments failed to subdue, as Thursday saw the bulls back in action as they lapped up stocks. Substantial buying in index heavyweights helped the indices strengthen the rally as they closed with gains of 2%. Part of this euphoria could also be attributed to the fact that while, until the early part of this week, there were some reservations regarding the open positions in the F&O segment, early news on Thursday that over 50% of the open positions had been rolled over to the following month brought in some relief to the markets. Short covering by bears also aided the index gains. With the derivatives settlement passing by without any adverse reaction, Friday was no different as strength on the bourses continued.

Top 5 losers over the week
COMPANYPrice on
November 21 (Rs)
Price on
November 28 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
bOM DYEING146140-3.7%167 / 43
CORPN. bANK231225-2.5%249 / 106
Ashok Leyland8078-2.4%89 / 42
ITC876854-2.4%913 / 602
INDO RAMA SYN9593-1.9%102 / 25

Amongst the important snippets in the business world this week were:

  • Positive news from the government regarding foreign investments in private sector banks perked sentiments towards the sector. The government has indicated that the FDI limit in private sector banks may be raised to 74%. In other news, the finance minister has indicated that the ministry may hand out more licenses to entities interested in starting banking operations. both these news indicate that as and when these policy measures are implemented the consolidation in the banking sector may pick up.Some key gainers

  • It was an eventful week for the domestic auto ancillary companies. First, on Monday, bharat Forge, India's largest forging company, announced its acquisition of a German forging company, to become the second largest after Thyssen Group. This was soon followed by another auto ancillary company, Sundaram Fasteners, announcing that it has entered into an MoU with Dana Spicer Europe to purchase their precision forge unit in UK. It must be noted that these acquisitions are a factor of the developing auto-ancillary outsourcing story as some prominent auto majors are looking towards Indian companies for sourcing of auto components. Acquisitions abroad will thus help the domestic companies to establish and/or firm their foothold in the international markets.Some key gainers

  • After lying low for the last couple of weeks, steel stocks were back in favour in the current week. As the optimism towards the sector continued on the back of continuance in steel demand and firm steel prices, news that another round of price hike is in the offing as early as next month, spiked sentiments further towards the close of the week. However, not much should be read into the price hike, as it will not be having a major impact on the earnings of steel companies. This is because the price hike is being affected owing to rise in input costs like iron ore, coke, etc and a significant rise in freight rates.Some key gainers

  • Aluminium stocks, Hindustan Aluminium Company (Hindalco), National Aluminium Company Ltd. (NALCO) and Indal, were also in favour. However, the biggest gainer amongst them was Nalco, which gained over 10% during the week. Spot alumina prices have surged in the recent past. Chinese smelters are stocking alumina in wake of expectations that the prices might inch higher in 2004. As a result, spot alumina prices are being pegged at close to US$ 350 per tonne (f.o.b.), which works out to over 22% of the current ruling aluminium prices on the London Metal Exchange. It must be noted that on the basis of past trends, alumina prices tend to hover in the region of about 12%-16% of the prevailing aluminium prices. National Aluminium Company Ltd. (NALCO), being the largest alumina player in the domestic market, stands to gain from this development as it has a significantly huge exposure in the exports markets. Hindustan Aluminium Company (Hindalco) (6%) and Indal (7%) also gained ground as they too have a presence in the alumina market.

The bSE-Sensex is back in the region above 5,000 levels. Last time, apart from the tech boom of 2000, these levels were seen for a brief period during the first half of the current month. However, after making a new 52-week high (5,135), the indices spiraled down on the back of intense profit booking and lost almost 8% within a few trading sessions. However, post that, the bounce back has been equally smart. Going forward into next week, while 'some' selling pressure at higher levels cannot be ruled out, next week should largely be a positive one considering the current weeks strength on the bourses. Further, over the medium-long term, prospects for the Indian economy and India Inc. continue to remain promising. Short-term corrections should be of little importance to investors with a longer-term perspective on the Indian economy and Indian equities in particular. Happy Investing!


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