The Hindu : Bourses turn weak on heavy selling

Online edition of India's National Newspaper
Monday, Feb 23, 2004

Business

Business

Bourses turn weak on heavy selling

A FEVERISH sentiment was in evidence in stock markets last week after a broadbased rally in the previous week following heavy sell-off by retailers and operators. The Sensex (the benchmark 30 share sensitive index of the Bombay Stock Exchange) lost 160.94 points (2.70 per cent) to end the week at 5850.72. Aggressive selling was witnessed in all sectors despite sizable purchases by foreign institutional investors. A series of public issues planned, especially by public sector enterprises in the next few weeks, and the expiry of F & O (futures and options) contracts in the current week had its impact on bourses, as retailers and operators were keen on booking profits with a view to investing the proceeds in public offerings.

On the National Stock Exchange, the NSE S&P CNX Nifty index lost 60.95 points, or 3.2 per cent to close the week at 1852.65.

Domestic mutual funds also effected net sales during the week. Majority of selling was witnessed in bank and information technology (IT) stocks. The selling in IT stocks was attributed to the growing concern in the U.S. on IT outsourcing. There was also fear that the U.S. Government's announcement of a freeze on issue of fresh H-1B visas might affect the Indian IT sector to a significant extent.

Major losers were Infosys, Satyam Computer, Wipro and Polaris. FMCG (fast moving consumer goods) stocks fell sharply following lower than expected fourth quarter results by Hindustan Lever. Bank shares witnessed a downslide with ICICI Bank leading the pack losing 5 per cent to close at Rs. 297.65. State Bank of India, HDFC Bank and Canara Bank were among the other losers.

Stocks of public sector enterprises were volatile as investors turned sellers to invest the proceeds in the public issues slated to hit the market in the coming weeks.

Meanwhile, the public offer of the Union Government's 24 per cent stake in Indian Petrochemicals Corporation (IPCL) evoked good response and the issue was oversubscribed on the first day itself. IPCL received bids for 6.5 crore shares against an offer of 5.9 crore shares and the floor price was set at Rs. 170.

Most of the bids on the first day came from institutional investors.

Stocks of IBP ended higher at Rs. 716.50 following the Government's announcement to offer its 26 per cent residual stake in the company on February 23. However Indian Oil Corporation, another promoter of the company, had said it would not subscribe to the offer. The Government's offer to sell 20 per cent stake in Dredging Corporation of India will open on February 26.

The response to the Government's offer to sell the stake in other major companies such as CMC, Oil and Natural Gas Corporation and GAIL India is keenly awaited in stock market circles. Also the initial public offer of Bank of Maharashtra for raising Rs. 230 crores opens on February 25.

Cement stocks including ACC and Grasim slipped marginally on profit booking.

Automobile stocks including Tata Motors, Hero Honda, Maruti Udyog and Ashok Leyland recorded smart gains during the end of the session with a good volume. Maruti Udyog has stated that it was planning to establish a greenfield car manufacturing facility in Haryana. The Haryana Cabinet has approved the proposal of the Industries Department to allot about 500 acres of land to Maruti Udyog in Gurgaon district.

Steel stocks witnessed profit taking despite keen demand for steel in the domestic and export markets and a firm trend in steel prices especially in the domestic market.

Many companies have announced a hike in steel prices ranging from Rs. 2,000 to Rs. 4,000 a tonne. Though Tata Steel registered marginal gains, SAIL, Jindal Steel and Saw Pipes encountered selling.

On the pharma front, gains were noticed in FDC, Cadila and Alembic counters. The directors of FDC will be meeting on February 24 to take a decision on the issue of bonus shares while Alembic has already announced a liberal bonus issue in the ratio of two shares for every equity share held. Cadila went up by 16 per cent during the week to finish at Rs. 500.10.

It is expected that the bourses may remain in a trading range, as investors are reluctant to enter in a big way ahead of the public offers slated for the coming weeks.

Rupee firm

Renewed heavy dollar demand amidst cash dollar shortage scare halted the rupee's overstretched rally against the U.S. currency, but steady foreign fund inflows and a global weak dollar helped restrict its losses to the minimum.

In moderately active market during the week, the rupee ended at 45.25/26 a dollar, lower from the previous week close of 45.23/24, but a sharp turnaround from the low of Rs. 45.28/29 struck in late deals on Monday.

Although, regular dollar supplies from export proceeds, expatriate remittances and foreign institutional investor inflows continued to give the rupee firm underlying support, steady dollar demand from state-run banks prevented gains, dealers said.

Interest rates harden

Interest rates moved up marginally, as the market is now less confident of the annual inflation falling to 4 to 4.5 per cent by March end.

The 10-year Government security was traded at 5.30 per cent and the five-year security at 5.07 per cent. Meanwhile, the year-on-year inflation moved up to 5.91 per cent as on February 7.

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