The week that went by was rather staid. The stockmarket scorecard was somewhat flat. Trading started on a sour note on Monday, with the Sensex plummeting in the first few sessions. The reason: markets were a little apprehensive about the NDA government's survival chances in the censure vote on Gujarat. The two index heavyweights, Reliance and Infosys, went southwards too. With the government getting a clean-chit, the Sensex stabilised somewhat.
Temporary setbacks notwithstanding, the 30-share index made some recovery on the back of healthy pharma results and the announcement by Reliance to increase polymer prices. The gains were marginal though. The Sensex moved up by mere 9 points (0.26%) while Nifty was down 1 point. During the week, combined trading volumes at both exchanges averaged about Rs 3,496 crore. However, Indian bourses failed to excite foreign institutional investors, which invested mere Rs 23 crore in April. In fact, since September last year the highest monthly investment by FIIs was Rs 715 crore in October and Rs 1,966 crore in February this year when the government divested its stake in two PSU majors. Going by the events, one can safely conclude that it's the stagnant pace of reforms, which has held back foreign investors.
Taking the story further, PSU stocks were the first to stage a recovery after the NDA government survived the censure motion in Parliament. In fact, PSU scrips appreciated over the previous week's best -- by far the best performance in April. Till last week, the market's interest in BPCL and HPCL stocks was on its way out thanks to the political drama, leading to an erosion in investor wealth by an odd-Rs 3,000 crore (between April 1 and April 25). The only PSU that managed to perform better than its peers was IPCL. Its stock rose by 30%. Events towards the end of the month justified the increase in IPCL's market valuation. Reliance, IOC and Nirma -- the three contenders for IPCL -- submitted their bids to the government. However, not taking any chances, investors preferred to book profits in HPCL and BPCL in the last session.
That apart, good performance by pharma heavyweights, Ranbaxy and Cipla, injected some life back into the markets. Led by a surge in generic exports, both pharma majors recorded a healthy growth in their bottomline. However, a dip in the net profits of IT education majors, NIIT and SSI, further damaged the-already subdued market sentiment about IT. With the sole exception of Infosys, the results of almost all IT companies have failed to give any indication about the prospects of this sector. Even Nasscom's projections about a 30% growth in software exports in 2002-03 failed to cheer the market. However, Nasscom has also cautioned about the prospects of tier-II IT companies. Incidentally, these companies have lately generated a lot of buying interest, despite the fact that most tier-II companies had a poor performance card.
On the economy front, the monetary policy failed to enthuse the banking sector, which had been expecting a cut in the bank rate. Which clearly means that the apex bank believes that economic recovery is in offing. This finds support in the optimistic 6.5% national income growth target set in the policy as against the 5.4% target in the fiscal gone by.
In the US, while the market bellwether Dow Jones closed 95 points higher, Nasdaq dipped by 45 points over the week.
Outlook
With earnings season almost over, the next trigger for Indian markets could be the IPCL divestment. Post IPCL-sell off, perhaps the FIIs may make more investments into the Indian markets. And if the past is any indicator, the IBP sell-off in February this year saw the Sensex zoom up by 115 points in one session. Even if this fails, a good monsoon and increased consumer spending should improve market sentiments. Case in point: two-wheeler companies registered high sales growth in April over the corresponding month last year. So, good luck, investors!
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