It was another lacklustre week for the market jittered with foreign institutional selling to start with followed by a surge on strong old economy results and then dampened by profit booking which pulled back Sensex to 3052 points. Overall the 30 share BSE Sensex as well as Broad 50 share Nifty gained a mere 1% (30 points). The combined volumes at both the indices rose to Rs 3300 crore with the turnover at NSE reaching Rs 2100 crore. With the usual buildup of financial year-end remittance pressure, FIIs sold equities worth Rs 91 crore during the week. Though, on an aggregate the net FII inflow was Rs 821 crore in October.
Index heavyweight Reliance Industries and Dr Reddy's Laboratories result was the weeks highlight. Reliance posted a 6.67% net profit growth while Dr. Reddy's clocked a solid 400% growth in net profits. Another sweetener from the Dr. Reddy's was an interim 100 per cent dividend. Based on aggregate results, the lower interest costs helped the manufacturing sector (525 companies) register a 10 percent surge in net profit despite a lack of demand reflected in poor sales growth. But these averages are skewed by robust performance of cement, pharmaceuticals and 2 and 3 wheeler segment.
The healthy quarterly performance of corporate giants belies fears that the economy is sinking in recession. Meanwhile, the government is confident of additional Rs 4000 crore mop-up from inclusion of 15 services in the tax net should compensate the lower customs collection. But the the targeted collection from sale of 11 PSUs remains uncertain, as the ministry of disinvestment wants the sale price to be the same for all classes of investors and keenly awaits SEBI to amend the takeover code in that respect. Further a 1.95 percent drop in exports for six months ending September and a fiscal deficit at 50 percent of the budgeted target are the stumbling blocks on the road towards economic growth.
Even on Wall Street, first the fear of a prolonged US retaliation, a low consumer confidence index, rising unemployment turned both Dow Jones and Nasdaq in bearish mode. With the federal reserve canceling a 30-year bond auction, send hopes of an early economic recovery and the antitrust case against Microsoft going in its favor led to a bullish trend. But still Dow Jones ended 2.37% lower than last week while Nasdaq folded up with 1.39 percent loss.
With markets showing sensitiveness to all kind of news-economic, international, domestic, its should remain range bound, more so if the FII investment start drying up but only to gear up in early 2002. Moreover, as SEBI has decided on the tight futures trading guidelines in 31 stocks, the participation in cash markets should improve, as the participants have a new deferral product at their disposal. Further the stocks with buyback offers and particularly PSU stocks should gain a center stage.