Stock markets were on a seesaw ride this week for two reasons. First, FIIs largely stayed away from the markets. And second, Infosys Q3 results failed to meet Dalal Street's expectations. The BSE Sensex inched up a mere 0.55 per cent while S&P CNX Nifty lost 0.85 per cent. However, the broad-based CNX 500 Index gained 1.25 per cent. The fall in advance-to-decline ratio from last week's level coupled with a 15 per cent rise in combined volumes at the BSE and the NSE reflected that markets were in a selling mode.
In fact, the slow pace of FII inflows saw markets undergo a downward correction in the initial trading session. Most market participants had anticipated that the year 2003 would start with a bang, with heavy FII participation. So far they have invested just Rs 13 crore worth of equities. However, select steel, pharma and banking stocks generated enough buying interest, which made up for FIIs lack of interest. With heavy investments made in government securities, the RBI decision -- if at all that happens -- to allow banks to book profits on these investments, will boost banks' bottomline.
As the week progressed the stock market's worries about FIIs were soon replaced by strong earnings expectations from index heavyweights, primarily Infosys. These hopes drove the markets up in two successive trading sessions on Wednesday and Thursday. However, Infy Q3 results proved to be a dampner. After registering a 3-4 per cent earnings growth in the previous two quarters, the Q3 earnings grew by 13.5 per cent. Though the company met its target, the market had expected that software services giant would make substantial revision in its annual earnings guidance. As a result, the stock was down 7.58 per cent over the week. Even the BSE IT Index registered a loss of 6 per cent — the highest in the past 12 weeks. On the other hand, the other index heavyweight Hero Honda's 15 per cent growth in net profits in Q3 failed to excite stock markets, and the stock slid 4 per cent over the week.
In other interesting developments this week, the finance minister gave the go-ahead to Indian companies, mutual funds and investors to invest in stocks listed in foreign stock exchanges. Other measures, which will give greater flexibility to Indian companies to manage their foreign currency transactions, were announced too. These moves come at a time when the country's has amassed huge forex reserves. However, big moves towards capital account convertibility went virtually unnoticed by the market. Also, while Moody's has hinted towards upgrading India's foreign currency debt rating in the near future, Standard & Poor has re-affirmed the junk status for India's sovereign debt, as it remains skeptical about government finances.
Outlook
Stock markets seem to be rather too optimistic expecting FIIs to do wonders. Historically, the first month of the year sees maximum FII inflows, however, the US-Iraq imbroglio may keep FIIs at bay for a while. As for the India Inc.'s Q3 results so far, none turned out to be too inspiring for the stock market, thus failing to give it a firm direction. Let us hope that next few weeks – with more Q3 results expected -- could change things for markets.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
