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An eventful week

Dec 6, 2003

After gaining more than 4% last week, the indices started this week too on a strong note. However, the intense selling pressure at the close of the week saw the indices give up some of those gains. Despite the huge sell-off witnessed on Friday, the BSE-Sensex and the NSE-Nifty managed to close the week with gains of 1.7% and 1.9% respectively.

This strength was an indicator of the strong positive bias for the indices. Further, since the indices were close to their 52-week highs made in November, it was crucial for the indices not only to make a new high but also to sustain the same. So, continuing exactly from where they had left off last Friday, the markets opened with a bang on Monday gaining over 100 points on the Sensex led by software heavyweights. Tuesday's trading was marked by significant volatility throughout the day as software stocks witnessed a bout of profit booking. However, just when it was being felt that the markets might close in the negative, a wave of buying in the last half an hour pulled the markets into the positive. Wednesday again saw strength on the bourses, this time led by intense buying amongst banking stocks, especially the private sector banks.

Top 5 gainers over the week
COMPANY Price on
November 28 (Rs)
Price on
December 5 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
BSE-SENSEX 5,045 5,132 1.7% 5,263 / 2,904
S&P CNX NIFTY 1,615 1,646 1.9% 1,688 / 920
MAX (I) LTD. 97 127 30.6% 149 / 64
UTI BANK LTD. 84 109 30.0% 135 / 36
WARTSILA INDIA 165 206 24.7% 206 / 107
SIEMENS 711 881 24.0% 903 / 262
SSI LTD. 131 162 23.6% 171 / 54

The seeds of profit booking were sown on Thursday itself, as indices remained in the red throughout the day only to witness some buying in the latter half of the trading day, which helped them to close marginally in the positive. But on Friday, after opening on a cautiously optimistic note and touching new 52-week highs, the indices fell. There was some hesitancy seen on the part of investors to invest at higher levels, which ultimately gave way to profit booking in the closing hours of trade on Friday. As a result, markets lost significant ground. In fact, Friday's losses took away almost 50% of the gains garnered in the first four trading sessions of the week!

Top 5 losers over the week
COMPANY Price on
November 28 (Rs)
Price on
December 5 (Rs)
%
CHANGE
52-WEEK
H/L (Rs)
HIND. ZINC 119 110 -7.5% 124 / 14
STERLITE IND. 1,575 1,460 -7.3% 1,630 / 137
KESORAM IND. 62 58 -6.6% 67 / 25
CORPN. BANK 225 212 -5.9% 249 / 112
SYNGENTA IND. 207 196 -5.4% 217 / 112

It was a very eventful week for the Indian stock markets with significant developments taking place during the week. Listed below are some of the key events.

  • The global technology major, Hewlett Packard (HP), announced a buyback of the publicly held shares of its Indian subsidiary, Digital Globalsoft Ltd. HP has offered Rs 750 per share to Digital's public shareholders. However, the final price will be arrived at through the reverse book-building process. Further, it must be noted that according to HP, the company might not be willing to pay the possible 'arrived-at' higher price for acquiring Digital's shares and in such a scenario, the company might come out with an alternative plan. The news saw the Digital stock close the week with gains of 14%. Other key gainers

  • Pharma stocks also attracted significant buying interest during the week. The buoyancy amongst pharma stocks could be attributed to the passage of a medicare bill in the US last week. The bill, which aims at increasing the US spending on medicines, could provide a huge export opportunity to Indian pharmaceuticals industry (generics and bulk drugs). It must be noted that Indian pharma companies already have a significant presence in the US markets. Some key gainers

  • Another key event for the week, which could be the first signs of a consolidation in the banking industry and which led to significant buying amongst private banking stocks, was the acquisition of a 14.7% stake by the global financial services major, HSBC, in one of India's largest private sector banks, UTI Bank. The stake was purchased from CDC Capital Partners at Rs 90 per share. HSBC has a further option to buy the remaining 5.3% stake from it over the next 3 months. The news saw the UTI Bank stock make significant gains during the week (30%). Other key gainers

  • In a positive move for Indian steel companies, the US administration has announced the removal of tariffs imposed on steel imports from companies in the EU and Asian region. Notably, this decision comes almost 16 months ahead of schedule as a way of averting any possible backlash from the rest of the world. This news could not come at a better time as Indian steel exporters had recently been issued warnings from the US and Chinese administrations, as they seemed to have exceeded their import quotas to these countries. However, the sector displayed a mixed trend during the week. Some key losers

  • FMCG stocks were also in the limelight this week. However, ITC was in particular favour. This can be gauged from the fact that the stock appreciated over 6% during the week. There are expectations in the market that the decision of a pending court case against the government with respect to the imposition of luxury tax could go in favour of the company. This would have a positive effect on ITC's bottomline. However, we feel, irrespective of the decision, the company's strategy is well on course. ITC has done well in its non-tobacco businesses like hotels, paperboards and packaged foods. The move towards FMCG stocks can also be taken as an indication of investor cautiousness, as FMCG sector is largely considered to be defensive and a good hedge in uncertain environment. Some key gainers

Going forward, we feel that considering the current 'improved' valuations of the indices and individual stocks, it wouldn't be prudent to take weekly calls and try to time the markets. From hereon, any gains on the indices will have to be supported by an equal improvement in the fundamentals and growth of the companies and the economy in general. However, the recent results of the polls held in four states, wherein the current ruling government had the first round of victory, sends out positive vibes not only to domestic investors but also the international investor community that if the current poll results are an indication of future things to come, the current policies and the reforms process of the government could very well continue for some more years. So think long, practice discipline in investing and do not be in a hurry to invest, lest you miss the train. Stagger your investment decisions. Happy Investing!

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