The Hindu : Bourses look up after slide

Online edition of India's National Newspaper
Monday, Mar 01, 2004

Business

Business

Bourses look up after slide

IMPROVED SENTIMENT prevailed on bourses towards the close last week following reports that the response to the Government's massive disinvestment programme had been a success.

The persistent slide during the early part of the week was largely attributed to heavy sell-off by investors who also squared up positions in view of the expiry of the February contract in the futures and options segment on Thursday and a slowdown by foreign institutional investors.

The Government warned market operators, including merchant bankers and some corporate houses, when the mega public offer by IBP received lukewarm response, raising suspicion that certain investment banks and corporates were engaged in price manipulation on the bourses.

The Securities and Exchange Board of India placed the market on ``high alert'' and warned of strict action against those found guilty of manipulating the markets. The so called "bear cartel" disappeared, thanks to the timely intervention of the Disivestment Minister, Arun Shourie.

According to market experts, the floating of public issues by the PSEs should have been staggered but there has been a compulsion on the part of the Government to mobilise over Rs. 14,500 crores before March to meet the disinvestment target for the current fiscal.

However, the Government on Friday said the response to the public offers in five companies so far had been "heartening' with all the issues getting oversubscribed.

Retail investors started selling across the counters much ahead of the public issues of the PSEs in the expectation that the Government would offer a fair discount.

Investors resorted to selling in the secondary market to raise funds to subscribe to the public issues that are bunched between mid-February and mid-March. Of course, there has been a diversion of funds from the secondary market to the primary market. But data show that retail investors participated only to the extent of three to six per cent in IPCL, IBP and CMC.

Mr. Arun Shourie is confident of achieving the revised budget target of Rs. 14,500 crores from disinvestment this fiscal.

He has said that foreign institutional investors were showing substantial interest in the public offerings.

The week began with a heavy sell off in index based stocks, especially public sector enterprises. The middle of the week saw high volatility on account of the expiry of February series derivatives contracts.

Even as reports poured in that the Government had identified the players who were pressing down sales ahead of the public offers from top PSEs, foreign institutional investors resorted to heavy profit booking in a host of old and new economy stocks, thus pulling the market down substantially.

Only on Friday did sentiment, though still cautious, improve and share prices firmed up on renewed buying. Between Monday and Thursday, FIIs had pulled out nearly Rs. 500 crores by way of profit booking.

The BSE benchmark 30-share index, which extended its losses for the second consecutive week, witnessed wide fluctuations in a range between 5875.23 and 5551.61 before ending the week at 5667.51 against the previous weekend close of 5850.72, a net fall of 183.21 points.

Prominent losers included BHEL, Reliance, Grasim, HDFC, Hero Honda, HLL, HPCL, ONGC, Hindalco, Ranbaxy, SBI, Tata Motors, Tisco, Tata Power, Wipro and Zee Telefilms.

Tech stocks showed a mixed response. On Friday, Infosys, Satyam and HCL Technologies were in keen demand following reports that a large foreign broking firm was said to be buying these stocks on expectations that they will report higher than expected earnings.

On its debut, Patni Computers Systems (PCS) staged a muted performance. The stock listed at a modest premium to its offer price of Rs. 230. Though it managed to cross the Rs. 300 level for a brief period, profit booking at higher levels dragged the stock down, closer to the offer price, as it ended with a gain of a mere one per cent at Rs. 232. Buying support at lower levels resulted in the stock recovering to Rs 250.35 on Friday.

In the power sector, Reliance Energy firmed up on buying support.

Among pharma stocks, Pfizer ended lower on reports that the company has recalled unsold stocks of Gelusil, one of its best-selling brands, after buyers complained of bad odour.

With effect from March 1, the Bombay Stock Exchange will shift 13 counters from `B1' to ``A'' group. These are Allahabad Bank, Alok Ind, Birla Corp, CESC, FDC, Gujarat Industrial Power, Indo Gulf, Ispat Industries, Maha Seamless, MRPL, Orchid Chemicals, Welspun Gujarat Stahl Rohren and Wyeth Ledrele. In all 11 companies are being shifted from ``A'' to the B1 Group while 47 are being shifted from the B2 group to the B1 group.

Rupee remains firm

The rupee remained firmly entrenched against the U.S. currency on the back of steady trade and capital inflows, but customary month-end pressures and a resurgent dollar overseas limited its gains.

The Indian currency ended at 45.2425/2475 a dollar, mildly higher from previous weekend levels of 45.25/26 after reaching peaks of 45.23/24 in intraday deals on Thursday.

Interest rates easy

The interest rates marginally fell last week. The ten-year Government security was traded at 5.27 per cent and the five-year security at 5.02 per cent.

The year on year inflation moved down to 5.84 per cent as on February 14.

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