BUSINESS

Bourses steady after two-way swings

WEEK IN FINANCIAL MARKETS

Bourses steady after two-way swings

FOR THE second straight week, stocks ended lower on the bourses. There was profit taking at higher levels by mutual funds and other domestic institutions in index-based heavyweights during mid-week following the Supreme Court ruling insisting on parliamentary approval for the disinvestment of two major public sector oil companies, HPCL and BPCL. Stocks however regained part of the losses on Friday with good buying by foreign institutional investors and bargain hunting by local institutions. Trading remained extremely volatile with the indices witnessing wide intra-day movements.

The BSE benchmark 30-share index fluctuated between 4330.85 and 4097.55 before ending the week at 4217.12 against the previous weekend close of 4305.91, a net fall of 88.79 points. The BSE PSE index dropped 363.96 points or 12.15 per cent to end the week at 2632.79.

The Sensitive index opened the week on a dismal note and plunged further losing 112 points on unabated selling. Tuesday witnessed extremely volatile trading but fresh buying in technology counters pulled up the index higher by 81 points. The volatility was caused by the imminent expiry of September futures on Thursday. Volatility was particularly seen in PSE stocks.

The recovery proved shortlived as the next two sessions saw the index losing nearly 141 points with PSEs, technology, pharma and cement stocks taking a pounding. Erratic movements were witnessed on Wednesday after early optimism received a setback following a bomb scare in South Mumbai. A brief recovery in afternoon trading was laid low subsequently by heavy selling. The loss was also attributed to offloading by margin traders.

The session on Friday was highly volatile initially as investors awaited the Special Court's verdict in the Babri Masjid demolition case. The Sensex recovered 121 points towards close from the intra-day low of 4098 after the Special Court dismissed all charges against L. K. Advani.

The rally was spread across the board with sectors such as auto, steel, pharma, technology, PSE and cement leading from the front. Renewed buying by institutions and retail investors lifted the market.

Despite the volatility, the undertone of the market remained cautiously optimistic amid rising hopes that economic growth will turn out stronger than expected this fiscal. It is believed that the Sensex will remain in the 4150-4300 range in the next few sessions and is likely to bounce back on the back of second quarter results.

During the week most PSEs witnessed heavy sell off. Sentiment was affected by the Supreme Court's ruling on the oil PSEs' disinvestment. On the other hand, Bharat Earth Movers witnessed heavy buying and hit a new six year high. IBP surged on interested buying.

In pharma, Ranbaxy, Cipla and GlaxoSmithKline Pharma moved lower. Ranbaxy moved up after the company said that it had received approval from the U.S. Food & Drug Administration to market its Panixine Disperdose (Cephalexin) tablets for oral suspension 125 mg & 250 mg.

Dr. Reddy's Lab looked up after the company announced that the U.S. FDA had issued final approval for the company's abbreviated new drug application for its nefazodone hydrochloride tablets. The product will be marketed through the company's alliance partner, Par Pharmaceuticals.

Orchid Chemicals remained firm on fresh buying after the company announced the commissioning of the first phase of its 50:50 JV manufacturing facility in China.

Infosys Technologies ended firm on institutional and speculative buying after the company announced that it would consider declaring an interim dividend along with its second quarter results on October 10.

Infotech Enterprises spurted on renewed buying after the company signed a long-term agreement to set up an engineering services unit for Bombardier Transportation in Hyderabad.

Sakthi Sugars was up after the company announced that its subsidiary, Sakthi Auto Components, has been awarded a contract by Delphi Automotive Systems (Delphi), U.S., the sourcing subsidiary of General Motors, for supply of critical auto components.

In the auto sector, Maruti skidded off track. Tata Motor gained after the company rolled out the locally made Indica to the specifications provided by British car maker MG Rover, which will sell the vehicles in Europe from November. Rover has signed an agreement with the company to buy 100,000 cars over five years.

Hero Honda Motor, Bajaj Auto and Tata Motors ended firm after extremely volatile intra-day movements.

Steel and cement stocks displayed a mixed trend. Cement stocks continued to reel under selling pressure on the back of falling cement prices. ACC, L&T, Grasim and Gujarat Ambuja Cements lost further ground on sustained selling pressure.

Poor price bids for NFL coupled with the news that the Government has deferred the disinvestment in the State-run fertilizer company by at least two years saw the scrip plummeting 20 per cent. Other fertilizer stocks took the cue from this stock's performance.

After a volatile week the rupee closed on Friday at a fairly comfortable level of 45.9350/9450 a dollar. However, the RIB redemptions, due in less than a fortnight, remain a major cause of speculation even though the RBI has stepped in again with some calming advice. Its recent diktats on OCBs and earlier on interest rate caps for NRI bank deposits are expected to curtail the inflow of dollars.

It is time to be extremely cautious in the forex markets.

The interest rates were steady during the week. The 10-year government security was trading at 5.33 per cent and the 5-year security at 4.93 per cent on Friday. The interest rates on NRE deposits have been capped at 100 basis points above LIBOR (against 250 points earlier) to reduce the arbitrage opportunities available between overseas and domestic interest rates. The RBI has assured that liquidity would not be impacted, despite outflow of funds on the maturity of SBI (Resurgent India) bonds.

The year-on-year inflation rate moved up to 3.88 per cent for the week ended August 30. The overnight intersest rate was around 4.50 per cent.

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