With economy hitting on all cylinders Indian stock markets lapped up old economy and cyclical stocks. The BSE Sensex moved up by 2.64% (85 points) while Nifty added 16 points (1.51%) to its last week's level. Even the FIIs returned from hibernation, investing a net Rs 212.70 crore during the week.
While auto and steel stocks continued to be favourites, cement stocks were the centre of attraction initially as key industry players saw their exports surge in June. Cement majors Gujarat Ambuja, ACC and Larsen & Toubro hit the 1-month high this week. However, the euphoria was short-lived. The onset of monsoon has dampened cement prices, which is bound to affect these companies who recently increased their capacity. As a result, cement stocks wrapped up the week almost flat.
While cement companies felt the heat, two-wheeler companies continued their glorious run. Auto giants Bajaj Auto and Hero Honda are expected to announce their Q-1 results next week. The two together with TVS Motors gained an average 5% over the week. The reason: Bajaj Auto saw its overall sales (by volume) grow by 18.76% in June over the same month last year, with motorcycles registering a 92.5% growth. While TVS Motors clocked a 95% growth in motorcycle sales for the month of June, Hero Honda's sales grew by 33.1%.
However, the star performer this week was cigarette major ITC. The stock rose a sharp 12.5% during the week to touch its 4-month high of Rs 720. With UTI scouting around for a buyer to offload its 13% stake, market participants are betting on the post open-offer to be at a premium to its current market price. While UTI was willing to sell its stake to largest ITC shareholder, BAT Industries, both ITC and government have been resisting that. Until UTI finds a right buyer, the stock will continue to be in the limelight. However, if the sell-off doesn't meet market expectations, the stock is likely to undergo some correction.
Displaying cautious optimism about the forthcoming Q-1 results, BSE IT Index was up a marginal 0.57% as against Nasdaq's loss of 1%. The cabinet reshuffle early in the week saw second-rung PSU stocks perk up, with market players expecting the divestment programme to be put in the top gear now. Taking advantage of high valuations, government has expressed its desire to offload its residual stake in divested PSUs. The central bank has gone a step further, by allowing banks to lend to PSU bidders, over and above the stipulated 5% cap for stock market exposure. But most divested PSUs today are quoting at a discount to the price at which they were sold.
Outlook
Upbeat about the Q-1 performance of India Inc., BSE Sensex is nearing its previous high of 3,362 level reached on June 12, 2002. Lot of interest will be centered on technology and auto stocks, with key players in these sectors expected to announce their results next week.
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