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Down, But Not Out

Heavy institutional selling and weak Nasdaq saw BSE Sensex lose 25 points while Nifty was down 16 points. But more Q-1 results from India Inc. may bring back investors to the markets in the near term.

Corporate fraud in the US played havoc with the Indian stock markets this week. Even the news of economy getting back on track and better-than-expected Q-1 results of Infosys and Hero Honda couldn't save the markets from a fall. The Sensex plummeted by 25 points (-0.74%) over the week while the Nifty dipped by 15.6 points (-1.45%). With more skeletons coming out of the closets of US corporations and, a resultant fall on the Nasdaq triggered off an across-the-board selling in the Indian capital market. FIIs – after 10 days of uninterrupted equity purchases -- turned net sellers by Wednesday, dumping Rs 105.55 crore worth of equities this week while domestic fund houses offloaded Rs 105.55 crore worth of shares.

The capital markets opened their account on Monday on a buoyant note, the Sensex gained 27 points on the back of old economy stocks. However, the news of accounting goof-up by US major, Merck – which led to heavy selling in the US market – saw the Sensex, after ruling firm on Tuesday, lose 68 points on the following two days. An overnight recovery of the Nasdaq and the government's decision to push disinvestment in full force saw the Sensex gain 15 points in the last trading session. Disinvestment minister Arun Shourie apart from charting out an aggressive plan for the sale of PSU oil majors -- HPCL and BPCL -- and other ratnas, also announced a limited stake sale of ONGC, IOC and GAIL on Thursday. Over the week, HPCL registered the maximum gain on Sensex, up 3.9%.

That apart, India too was rocked by an accounting fraud. Rolta India was found guilty of inflating sales and overstating profit. Consequently, its stock crashed, down 20%. Overall, the biggest losers this week were IT stocks (mainly second-rung). Backed by weak Nasdaq and heavy institutional selling, BSE IT Index lost 4.5%. Even Infosys' improving profits by 3.1% over the previous quarter couldn't pep up the markets. Over the week, Infosys was down 2.7% as players booked profits. Mastek managed to remain in the black as its net profit rose to Rs 17 crore this quarter.

Auto giant Hero Honda witnessed a 77% growth in its Q-1 net profit over the corresponding quarter last year. Its share clocked a 1.1% gain over the week. TELCO, on the other hand, despite registering a 31.3% sales growth in June, lost 4%. Cement stocks witnessed relatively less action. While Gujarat Ambuja registered a 3.5% fall, others remained in the narrow upper band. Most of the steel stocks – which attracted buying in recent weeks due to rising prices -- lost ground on profit booking. Steel major Tisco shed 0.6%.

Globally, in the US, Nasdaq shed 5% while the broader Dow Jones ended the week down 6%, despite President George Bush's assurance that the tough measures will be taken to prevent frauds.

Outlook
This week's fall could be a short-term phenomenon. With more Q-1 results expected to pour in, investors are bound to gain confidence. With economy showing signs of recovery and with government putting its divestment programme in top gear, stocks are expected to move up in the near-term.