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Slippery Slope

Market was hammered following the postponement of Divestment process. To an extent, technology stocks came to rescue, but it wasn't enough to offset the massive sell-off in PSU stocks.

Derailment of the disinvestment process took its toll on market. Despite the short lived mid-week rally in technology stocks, the BSE Sensex lost 42 points (-1.34%) and the NSE Nifty ended the week down 3.2 points (0.32%).

Institutional support was amiss. FIIs sold equities worth Rs 11.3 crore, while domestic funds were net buyers worth Rs. 9.41 crore. The lackluster trading activity was amply reflected in the 18% fall in the combined average turnover at both the exchanges.

With postponed disinvestment in Hindustan Petroleum and Bharat Petroleum, all PSU stocks were on slippery slope. The top losers were: Hindustan Petroleum which shed 25% of its value, while Bharat Petroleum was down 19%.

With PSU rally punctured, technology stocks are gaining attention. The BSE IT Index gained 3.3% over the week. However, the gain was reduced a bit by the weekend due to weakness in NASDAQ on Thursday. The biggest gainer was Wipro which rose 8.1% on rumors of bagging a $500 million order from Pepsi. Another major gained during the week was Polaris Software, which gained 4.1%. Its merger with Orbitech, a Citigroup subsidiary, has made it attractive to the investors.

Cement stocks were also in limelight. With the monsoon almost approaching its end, cement stocks saw increased interest in anticipation of hike in cement prices. Gujarat Ambuja gained the most among Sensex stocks (5.3%) followed by ACC, which ended the week up 4.8%. Further, with most banks lowering interest rates on housing loans, construction sector is likely to boost demand for cements.

The pharma stocks were also in news. The National Pharmaceutical Pricing Authority (NPPA) lowered the prices of 8 drugs including anti-TB and Vitamin C formulations, and hiked rates for 13 others - including insulin. The price cut in anti-TB drug prices is bad news for drug-makers like Lupin Laboratories and Novartis. Overall, the BSE Heathcare Index was down 1.6%.

In an interesting move, SEBI has modified the takeover code by removing the automatic exemption granted to preferential allotment. This means that the companies that make a preferential allotment of shares to their promoters will now have to abide by the takeover code and consequently will have to make open offers to minority shareholders. The SEBI has also decided to set a limit on the creeping acquisition for a financial year at 5% of the capital from October 1, 2002. Earlier, this limit was kept at 10% for a 12-month period. It's a welcome move, as it will increase transparency and will help in protecting minority shareholders' interest.

Outlook
The approaching quarter-end should enhance market activity and could well act as a trigger for specific stocks. However, near-term the market seems on a slippery slope.