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Cautiously Cheerful Market

Volumes surged over Rs. 2000 crore for a straight second week. Old Economy brought cheers despite disappointment from second rung tech listings.

The market gained 39-points on the Sensex to past the psychological 3000 mark. While the FII continued purchases at a slower pace, and average number of shares which rose far outpaced the number of shares that declined signaling a bullish mood. The good news - relaxed buyback norms and strong performance from old economy players boosted market volume. The combined average daily volumes at NSE and BSE rose to Rs 2700 crore against Rs 2000 crore last week.

Few technology companies posted their results. Wipro showed a 40 percent rise profits and added 26 new customers, but barely managed to match market expectation. However, the pain of second rung software players was visible. Sonata Software net profit fell almost 30% while HCL Infosystems showed was a sharper fall of 35%. Polaris Software escaped red, though showed a decline with 10% growth in net profit. However the consumer durable and FMCG companies' brought little cheer to the market. On growing sales (up 10%), increased ad-spend, HLL net profit grew 21%. ITC and Hero Honda also trumped the market expectation by recording huge surge in net profits.

Apart from the results, eased buyback norms was also announced during the week. The cash rich companies as well as the promoters keen to consolidate their stake will now be able to buy back 10% of their equity through a board approval. However a 25% buyback will still require a shareholder's approval. Moreover, after effecting a buyback, the company can make a fresh equity issue within 6 months as against the earlier provision of two-year.

While not so disappointing results has added to the markets strength. However, a meaningful government initiative to improve economic fundamentals and boost markets sentiment remains awaited. For the half-year ending September, the tax collections dropped by 6.2 percent as compared to last year, for the corresponding period. On the export front, only 6 of 16 export heads managed a positive growth in the first quarter. However, the commerce ministry remains optimistic that US companies will outsource from Asian countries, which will aid in meeting the 12 percent annual exports growth target. But a persistent fall in revenue collections and slip on export targets will mean exceeding the budgeted fiscal deficit of 4.7 percent.

In the U.S., overall the market lost despite good performance from IBM, Intel, Microsoft and Johnson & Johnson. The market dragged a percent on the NASDAQ as well as on the Dow on Anthrax fear.

Outlook
The market fancy for domestic pharma stocks, mainly Cipla and Ranbaxy surged ahead of their quarterly reports. The markets also discounted the growth in their generic exports, should US drug majors need to outsource the anti-anthrax drug from these companies. Indian companies have a cost advantage over foreign drug manufacturers. Prominent results – mainly the cyclical and drug companies, which also happen to be Index heavyweights will lead the market course in the coming week.