The market turned euphoric this week powered by good earnings news from the technology bellwether. The BSE Sensex gained 65 points (2.2 per cent) and the NSE Nifty went up by 23 points (2.7 per cent). Except on Wednesday, the market rose on every trading session. Initially, it was the PSU stocks, which rallied following the Prime Minister's positive stand on disinvestment. Towards the end of the week Infosys's better than expected second quarter results provided the impetus.
FIIs were, however, unmoved by these positive developments. They remained net-sellers for the sixth consecutive week and offloaded Rs 420 crore worth of equities. Domestic mutual funds, on the other hand, showed some enthusiasm and made net-investments of Rs 95 crore. Inspite of this recovery, trading activity was relatively dormant this week, as the combined average trading volume at both the exchanges fell by almost 20 per cent.
The big daddy of Indian software Industry - Infosys, did it again—delivering more than what it promised, thus bringing the momentum back in tech counters. The company's bottomline rose a healthy 12 per cent (year-on-year) during the second quarter while the revenues went up by 15 per cent on sequential basis. However a higher contribution of on-site sales and hence higher selling & marketing expenses saw a modest earnings growth of 4.1 per cent over the previous quarter. More encouragingly the company raised its annual revenue projections from 18 per cent to 30 per cent. The stock rose by 7.5 per cent over the week propelling the BSE IT Index by 6 per cent. The resultant gain was the largest in the past seven weeks.
It, however, needs to be seen whether the buying interest will be sustainable or not. The results of IT companies and their profit guidance, so far, paints a rosy picture. Hughes Software recorded a 31 per cent surge in net profits. This was driven by cost-cutting. The company plans to reduce its exposure to the troubled telecom sector. Mastek also recorded a two-fold jump in its bottomline. Like Infosys, the company hopes to see increased revenues from its offshore projects.
PSU stocks remained in the limelight following the Prime Minister's statement last week that disinvestment will continue. The two major disinvestment candidates, Hindustan Petroleum and Bharat Petroleum gained 20 per cent and 12 per cent, respectively. However, much will depend on the CCD (Cabinet Committee on Disinvestment) meeting, which is scheduled for the next week.
Among other sectors, pharma and FMCG stocks were range-bound. But, auto stocks rose sharply on expectations of better sales. Bajaj Auto gained 9% and Hero Honda ended the week up 7.5 per cent. The other cyclical sector – cement was also in the news. This was on account of a 3.4 per cent increase in the shipments in September. However, stock prices of these companies moved in the narrow range.
On Wall Street, the markets made a smart comeback after being in hibernation for seven weeks. Following the 41 per cent rise in GE's Q3 earnings, the NASDAQ went up by 6 per cent and the Dow Jones gained 4.3 per cent.
Outlook
The Market seems to have got a boost from the incoming IT numbers. A continuation of this trend could impart more stability and renewed buying interest. Apart from earnings, the week's CCD (Cabinet Committee on Disinvestment) meet is also likely to set the future course of action.
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