• JULY 19, 2003

Finally, a correction!

Last week we concluded our note by saying, "since we are in the earnings season, sentiments in the month of July will primarily be governed by the results being announced by industry stalwarts" and "Volatility could be the flavour for next week". This was precisely what was displayed by the indices over the week. Finally, at close on Friday, markets ended in the negative territory for the week with the BSE Sensex losing 0.8% while the NSE Nifty lost 1.9%. By virtue of the fact that software sector, which was out of favour this week, has a relatively higher weightage on the Nifty, its losses were also higher.

For detailed results: Wipro: Performance disappoints

It must be noted here that amongst software stocks, the sole gainer for the week was the telecom software service provider, Hughes Software, which also announced its results this week. Among other important results that were declared during the week were Hero Honda, HDFC and HDFC Bank

Top 5 gainers over the week
COMPANY Price on July 11 (Rs)Price on July 18 (Rs)%CHANGE52-WEEK H/L (Rs)
BSE-SENSEX 3,6763,648-0.8%3,750 / 2,828
S&P CNX NIFTY 1,1621,140-1.9%1,176 / 920
HIND. ZINC324643.3%48 / 14
CORPN. BANK16118816.7%197 / 97
LIC HSG. FINANCE13115316.3%169 / 57
UTI BANK LTD.657515.4%79 / 33
BPL LTD.333814.8%72 / 22

As far as the top gainers list is concerned, not much importance should be given to the constituents in the list. Corporation Bank and LIC Housing Finance figure in the above list due to the rumours that the latter was likely to pick up a stake in the housing finance arm of the former. However, LIC Housing Finance was quick to come out with a clarification stating that the rumours were baseless and no senior management of the company had even “thought” about this issue. Moreover, for Corporation Bank, the cause for optimism could be the expectations of good June quarter results (to be announced on July 26, 2003) in line with other banks.

Top 5 losers over the week
COMPANY Price on July 11 (Rs)Price on July 18 (Rs)%CHANGE52-WEEK H/L (Rs)
MASTEK326201-38.5%615 / 197
ICI INDIA152129-15.5%160 / 77
G.E.SHIPPING5547-15.4%56 / 26
NIIT150127-15.2%231 / 93
HINDUJA TMT247210-15.0%311 / 45

Mastek was the top loser for the week as the company gave a poor guidance for FY04, wherein it reduced its bottomline guidance by 30% citing billing pressure, despite strong volume growth. As far as Hinduja TMT is concerned, the uncertainty over the rollout of the Conditional Access System (CAS) is taking a toll on the company’s stock price. The stock turned out of favour this week on the possibility of a further postponement of the CAS rollout, this time the reasons being shortage of set-top boxes and absence of revised rates by broadcasters. It must be noted here that the stock has run up significantly since the passage of the Cable Television Networks (Regulation) Amendment Bill, 2002 (or CAS) as the implementation of CAS resolves the issue of under-declaration by cable operators. Improved declarations by cable operators, post-CAS, would be significantly beneficial to Multi-System Operators (MSO’s) like Hinduja TMT as they earn fixed percentage margins on subscription revenues earned by broadcasters. Hence, postponement of CAS does not augur well for the company.

Going forward into next week, the outlook remains much the same. Next week will see a pick up in the declaration of 1QFY04 results. Some key results to look forward to during next week include Telco, Ashok Leyland, Tata Power, Ranbaxy, Tisco, ACC, Satyam Computers, SBI. ITC, ICICI Bank, Bajaj Auto and ONGC. These results assume significance and would play a crucial role in deciding the near-term direction for the markets, especially after the weakness seen in the markets this week.

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