The Hindu : Business : Bourses cautious on budget eve

Online edition of India's National Newspaper
Monday, Feb 28, 2005

Business

Business

Bourses cautious on budget eve

A CAUTIOUS sentiment prevailed on the bourses last week as marketmen adopted a wait and watch attitude and refrained from taking any fresh positions ahead of the Union Budget. The Sensex once again showed a small downward variation despite sustained inflows from foreign institutional investors and high expectations from the budget. Operators largely confined their activity to squaring up positions in the futures and options segment during major part of the week due to the expiry of February series contract on Thursday. However, a substantial rollover was witnessed to March derivatives contracts.

Crude oil prices moved well above $51 a barrel while estimates of a sharp rise in India's oil import bill for the current fiscal by 37 per cent to $25 billion had a sentimental impact on the market.

Meanwhile, the pre-budget Economic Survey hinted at reforms in the tax structure and government expenditure and favoured a hike in foreign direct investment limits not only in private banks but also in other sectors such as retail, to push up investments. The survey also indicated the possibility of a hike in FII holding limit in public sector banks.

The BSE benchmark 30-share index witnessed restricted but volatile activity and moved between 6622.62 and 6515.73 before ending the week at 6569.72 against the previous weekend close of 6584.32 for a net loss of 14.60 points. Foreign institutional investors reported net investments of Rs. 807 crores in the first four sessions of the week, taking total purchases in February to over Rs. 7,000 crores, the highest in any single month so far.

Local mutual funds too were net buyers to the tune of Rs. 191.56 crores during the same period.

During the week, the volume of business on the BSE was Rs. 11,356 crores and on the NSE Rs. 22,326 crores against Rs. 11,037 crores and Rs, 23,355 crores respectively.

Construction stocks surged after the Union Cabinet cleared liberal foreign direct investments in the real estate sector.

Oil-marketing companies attracted buying interest on firmer international prices. IOC, HPCL, IBP and Indraprastha Gas were on demand amid reports that excise duty might be raised on diesel and petrol, while it might be cut for kerosene and LPG in the forthcoming budget,

Oil and gas exploration PSU ONGC was traded higher on reports that energy companies might be exempted from sharing the subsidy burden in 2005-06.

Though the Government has raised the abatement level for MRP-based excise on pharmaceuticals to 40 per cent from 35 per cent fixed earlier, it only had a marginal impact on pharma stocks. Ranbaxy slipped on reports that Pfizer has filed a lawsuit against the company. Torrent Pharma gained on news of a tie-up with AstraZeneca to develop a drug for the treatment of hypertension.

Orchid Chemicals surged on plans to launch 10 non-antibiotic drugs in the U.S. and Europe. Sun Pharma surged in early trades on the back of a 20.50 lakh shares block deal on the BSE.

Among automobile stocks, Maruti Udyog made substantial gains. Hero Honda Motors was down following reports that Honda Motorcycles & Scooters India, the 100 per cent subsidiary of Honda Motor Co of Japan, will be competing with Hero Honda in its bread-and-butter 100-125 cc motorcycle segment.

Tata Motors on Friday announced that it proposed to acquire 21 per cent stake in Hispano Carrocera S.A (HC), a well-known Spanish bus manufacturing company, with an option to acquire 100 per cent holding. Mahindra & Mahindra surged on reports that the company will be exporting around 300 units of Scorpio sports utility vehicles to Malaysia.

TVS Motors rallied on plans to set up new plants in Malaysia, Mysore and Himachal Pradesh. Eicher Motors on Friday announced that it had decided to focus on its commercial vehicles business as a major growth driver and entered into discussions with TAFE for divestment of its tractors and engines businesses as going concerns.

Boosted by the Government's decision to allow operational autonomy for PSU banks, SBI scaled an all time high of Rs. 694 on Thursday. Quite a number of other public sector bank stocks also edged higher.

Media sector shares also gained. Stocks such as Pritish Nandy Communications, Mid-Day Multimedia, Saregama, NDTV and Mukta Arts were among the major performers. However, Zee Telefilms lost after the Chennai High Court directed Prasar Bharati to telecast the upcoming Indo-Pak cricket series and gave the BCCI the freedom to engage any producer for the purpose of live feed except Zee Telefilms and ESPN Star Sports.

IT bellwether, Infosys, closed marginally higher. Satyam and Wipro finished lower. Nucleus Software surged to a 52-week high after announcing a licensing deal with General Motors Acceptance Corporation, a subsidiary of General Motors.

Cement stocks Gujarat Ambuja, Grasim and ACC registered marginal losses. In the meantime, consulting firm, Dun and Bradstreet, has indicated in its latest sectoral updates that cement demand is likely to grow by 8-9 per cent annually in the next few years.

Among stock specifics, the UB group and Shaw Wallace gained after the UB group's chairman announced a hostile bid to acquire a 25 per cent stake in Shaw Wallace.

At the fag end of the week, textile stocks were on demand. Bombay Dyeing, Rajasthan Spinning, Century Textiles, Raymond, Arvind Mills, Siyaram Silk and Nahar Spinning moved up ahead of the budget on hopes that the budget will lower excise duty on most synthetic fibres and yarns.

The Union Budget, being presented today, will dictate the short-term trend in the market. Market players are keenly awaiting some changes in the Securities Transaction Tax (STT).

Interest rates steady

Interest rates were steady during the week, awaiting the budget proposals. The ten year government security was traded at 6.49 per cent and the five year security at 6.35 per cent. The year-on-year inflation remained unchanged at 5.01 per cent for the week ended February 12.

P. Narasimhan

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