• FEBRUARY 10, 2007

Winning streak continues...

Though the markets ended the week marginally positive, the overall sentiments for the week were that of caution. The week was marked with volatile sessions of buying and selling as the markets forged the path upwards. During the week, the BSE-Sensex gained 0.9%, while the NSE-Nifty remained flat.

Markets ended in the positive territory in three out of their five trading sessions during the week. The week started on a firm note with Sensex gaining 112 points on Monday. However, markets remained subdued on Tuesday paring marginal gains, before vaulting gains of 165 points on the following day. However in the remaining two days, the bears dominated most of the trading sessions.

As far as the institutional activity on the bourses was concerned, while Foreign Institutional Investors (FIIs) were net buyers to the tune of nearly Rs 29 bn, domestic mutual funds sold shares of Rs 5 bn.

(Rs m)MFs FIIs Total
2-Feb(776)6,646 5,870
5-Feb(1,655)3,450 1,795
6-Feb(283)6,560 6,277
7-Feb(379)5,454 5,075
8-Feb(1,930)6,989 5,059
Total(5,023)29,099 24,076

Amongst the sectoral indices, it was BSE Auto and BSE Bankex that registered maximum gains this week. While former was up 2.7%, the latter was not left too far behind and gained 2.1%. Bajaj Auto (up 9.7 %) drove gains in auto sector, while gains in banking sector were propelled by buoyancy in the ICICI Bank (up 5%) and SBI (up 1.4%). Significant gains were also registered in small size banks like Syndicate Bank (up 6.9%) and UCO Bank (6.4%). IT sector also registered smart gains, on the back of 4.5% gain in Infosys. In the mid cap IT space, gains were seen in Rolta (up 6.7%), Cranes Software (5.7%) and NIIT Technologies (5.2%).

IndexAs on Feb 2As on Feb 9% Change
BSE AUTO5,598 5,751 2.7%
BSE BANKEX7,406 7,560 2.1%
BSE IT5,392 5,479 1.6%
BSE Capital Goods9,824 9,940 1.2%
BSE METAL9,457 9,114 -3.6%
BSE Consumer Durables3,969 3,926 -1.1%
BSE FMCG1,920 1,901 -1.0%
BSE MIDCAP6,118 6,065 -0.9%
BSE SMLCAP7,561 7,490 -0.9%
BSE PSU6,348 6,303 -0.7%

Having looked at the institutional activity and the movement in key indices in the last week, let us consider some sector/stock specific developments.

Tractor and utility vehicle major, Mahindra & Mahindra (M&M) and Escorts are in the race to acquire a stake in Punjab Tractors (PTL), the fourth largest tractor manufacturer in India. Tata Motors has also evinced interest and has teamed up with Fiat group's CHN (New Holland Tractors India) to bid for the controlling stake in PTL giving it its maiden entry into the tractor business. Acquisition of the stake in PTL would catapult Tata-CHN to the third position in India's tractor market. While PTL has 9% share of the domestic market, CHN enjoys a 5.2% market-share. Also in the fray is M&M which has put in a non-binding bid to acquire the combined stake of Actis and the Burman family totaling to 43.5%, while Escorts is yet to put in a formal bid. The acquirer of the combined stake will have a controlling stake in the company. The success of M&M in acquiring the stake will increase its market share to 40% from 32% and also enable it get a hold of a manufacturing facility in the potentially huge Northern market. During the week, Punjab tractors registered a mammoth gain of 36.2%, compared to a 0.6% increase in M&M.

Top gainers during the week (BSE A)
CompanyPrice on Feb 2 (Rs)Price on Feb 9 (Rs)% Change52-Week H/L (Rs)
BSE Sensex14,404 14,539 0.9%14,724 / 8,799
S&P CNX NIFTY4,184 4,187 0.1%4,245 / 2,596
Punjab Tractors248 338 36.2%359 / 191
Bharat Electronics1,372 1,599 16.5%1,748 / 815
Shipping Corporation of India179 201 12.4%216 / 118
Torrent Pharma217 240 10.9%337 / 158
IGATE Global344 381 10.7%432 / 145

The country's largest bank, State Bank of India (SBI), is planning to raise US$ 700 m by way of Tier II capital overseas by March 2007 to shore up capital and expand its loans portfolio. The public sector major may raise the capital by selling bonds overseas. Once the Reserve Bank of India (RBI) transfers its 59.7% stake in SBI to the government, the state holding in the bank could be brought down to 51% in phases. According to the existing SBI Act, the government's stake can be brought down to 55%, but after the amendment to the Act, which is pending in the Parliament, the stake could be reduced to 51%. The bank has headroom to raise US$ 2 bn this fiscal. The bank is also planning to come out with its second public issue. With the country witnessing strong credit growth and comparatively lower deposit growth, this move will help the bank get access to more funds and expand its presence. While SBI registered a gain of 1.4%, its peer Oriental Bank of Commerce (OBC) witnessed a sharp rise of 6.2%

Top losers during the week (BSE A)
CompanyPrice on Feb 2 (Rs)Price on Feb 9 (Rs)% Change52-Week H/L (Rs)
Sterlite Industries520 459 -11.7%614/253
Century Industries709 631 -11.0%780 / 260
Bombay Dyeing706 641 -9.1%989 / 323
Finolex Industries90 83 -8.4%129 / 66
Hinduja TMT708 656 -7.4%867 / 345

Global Broadcast News Ltd. (GBN), part of the TV18 Group (now Network 18) made a sizzling debut on the bourses. The scrip listed at a premium of 70% over its offer price of Rs 250. Global Broadcast News Ltd (GBN) commenced its operations in December 2005, with the launch of CNN-IBN channel in the English language news and current affairs space. The channel achieved leadership position within six months of its launch and currently enjoys a market share of 37.6%, compared to 35.4% of its nearest competitor NDTV 24X7. After cementing its presence in the English general news genre, GBN ventured into the Hindi news genre with the launch of IBN 7 (erstwhile Channel 7). The stock ended the week with a gain of 96% to close at Rs 490. Zee Entertainment the Subhash Chandra controlled entity, also ended the week with a handsome gain of 5.3%.

Markets have continued to grow at leaps and bounds with sustained buying interest amongst investors. Sustained growth in the corporate earnings has substantiated the Indian growth story. However, some concerns in the form of inflation pressure on the back of rise in the prices of essential commodities and oil prices can pose threat to the growth prospects of India Inc. With budget getting round the corner, the future course of markets will be determined by government's policy announcement. Till that time, we expect markets to continue to trade in volatile manner. As such, we advise our investors to stick to a disciplined mode of investment. Factors such as fundamentals, quality of management and valuations should at no point be overlooked as they prove to be decisive clauses in the success or failure of an investment decision. Further, with the Sensex now having entered an unchartered territory, investors need to be more rational and avoid any hasty decisions before the budget.Happy investing!

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