• MARCH 24, 2001

Spring's here lets see some cheer…

The markets saw another week of decline as uncertainties arising from the exchange payment crisis, political turmoil and weakness on the U.S bourses all bore down on the indices. This is the sixth consecutive week that the two benchmark indices, BSE and NSE, have fallen.

The sell off that started in the week after the budget has not seen a let up, as a constant flow of negative news has kept sentiments depressed. In the current week, the continuing political squabbles, investigations on exchange officials, I.T raids on top brokers, run on Gujarat banks, bankruptcy of brokers and finally the Fed failing to meet interest rate cut expectations weighed down on the markets.

Technology stocks continued to get battered for the better part of the week. A big dampner for technology and the markets was the profit warning by VisualSoft Technologies. The company has stated that it will record a negative sequential earnings growth. However, year on year, earnings are expected to increase by 90%. This is the fourth profit warning by a major Indian Technology house. The earlier victims of the tech slowdown include Geometric Software, Mastek and NIIT. A lesser-known software company, KPIT Systems, has also issued a warning. The company has claimed that the slowdown in the U.S economy has adversely impacted revenues.

The warnings could validate the theory of a U.S economic slowdown impacting the income statement of Indian software companies. Nevertheless, investors need to show prudence as companies failing to meet targets could make the faltering U.S economy a scapegoat. One cross check could be the geographical revenue break up of a company.

Stand-alone refineries heated up considerably, as the BPCL board approved the acquisition of the Government's stake in Koch Refineries (KRL). The Government holding is being acquired at a considerable premium to the market price, which triggered off the buying spree. However, these counters have seen a sharp slide as although BPCL and IOC will be acquiring the stand-alone refineries they are not required to make an open offer. The argument put forward is that the transfer of shareholding does not result in a change in management. Hence, does not warrant an open offer. Also, with OPEC cutting crude oil production, markets remain uncertain about oil price movements, which could firm up adversely affecting the global economy. The Pharma sector was amongst the key loser towards the end of the week as news flowed in that the much-awaited price decontrol legislation is not expected to come through in the current fiscal.

March has not been a cheerful month for the bourses. There has been a string of bad news that has kept sentiments subdued. Although the markets have discounted this news they continue to remain fragile. Any further negative events could see the indices touch new lows. The current valuations could also see some bargain buying. But for volumes to gain strength again the confidence will have to be rebuilt. Lets hope fortunes change with the start of a new month.

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