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Optimism Galore

Stock markets witnessed a modest rally led by index heavyweights and technology stocks. With government announcing a bailout package for UTI, market is likely to heave a sigh of relief.

This week belonged to index heavyweights and tech stocks, leading to a modest rally in the stock market. While the BSE Sensex gained 62 points (2%), the NSE Nifty ended the week up 15.4 points (1.6%). The negative sentiment -- which hammered markets continuously in July – is on its way out as this is the third consecutive weekly rise in the indices. However, institutional investors still remained skeptical. While FIIs bought Rs 68 crore worth of shares, domestic mutual funds remained net sellers, offloading stocks worth Rs 76 crore.

However, big news came on the UTI front, with the government announcing a bailout package for the country's largest AMC on Saturday. Apart from splitting UTI into two AMCs, the government has promised Rs 6,000 crore for US-64 and Rs 8,000 crore for all assured return schemes. Although this will not be in cash and the modalities are still to be announced, all this will definitely boost investors' confidence as the extent of sell-off by UTI will stand reduced considerably. For some time now, UTI had been consistently dumping stocks to meet its redemption requirement.

Coming back to what transpired on the bourses this week, index heavyweights witnessed renewed buying interest. While Telco gained 4.8%, Reliance Industries was up 2.3%. The rise in the share price of large-cap FMCG majors like HLL (3.8%) and ITC (2.2%) saw the BSE FMCG Index move up 2.2% over the week. Interestingly, most mid- and small-caps in the sector remained in the red.

But the market's delight was technology stocks, which once again lead the market. The BSE IT Index was up 3.7%. In the large-cap segment, Satyam Computers gained the most (8.5%), as the company entered into a partnership deal with the Ireland-based IONA -- a leading e-business company – to provide Web services and application server platforms to IONA. Wipro and Infosys also ended the week in the black. The biggest gainer this week though was a second-rung outfit, Hexaware Tech (20%), on the announcement that it had bagged a new contract from a Germany-based company, Deutsche Leasing. This week, some tech companies also disclosed their Q-4 results. HCL Technologies witnessed a sequential quarter growth of 5.7% after three consecutive quarters of downtrend, whereas, HCL Infosystem and SSI posted lower net-profits.

Although, the BSE Healthcare Index just gained 1.1% this week, domestic pharma sector bounced back with a 9.3% growth in July 2002. According to ORG-Marg data, pharma majors, Dr Reddy's Labs and Ranbaxy registered a growth of 12.1% each.

On the PSU front, the share price of HPCL and BPCL ended the week down 4% and 6.5%, respectively. The reason: the delay in the divestment process. The meeting of the Cabinet Committee on Disinvestment was postponed thrice in a week due to the unexpected involvement of the defense minister. Both George Fernandes and Ram Naik favour public offering, instead of a strategic sale. Why this twist? As marketing of petroleum products has already been thrown open to private players, these companies will attract more investment anyway. So, making pubic offer at this juncture makes no sense. Therefore, if management isn't handed over to a private player at the earliest, the sale of equity may not fetch the best price.

With the government announcing a bailout package for UTI, market is likely to be upbeat, bringing back investors' confidence to some extent, as UTI will no longer be an aggressive seller in the market. In the past couple of months, the country's largest AMC had been consistently offloading shares to meet its redemption needs. Basically, the coming week should see markets in the positive terrain.