After a superb run last week, stock markets stumbled this week. With the bulls retracing back from stock markets, the Sensex—which was up an encouraging 3.59 per cent last week—was down 0.20 per cent this week. The Nifty too was down 0.53 per cent against last week's rise of 3.76 per cent. As compared to large-caps, mid-caps dominated markets. The S&P Mid-cap Index rose 3.37 per cent—though almost half of what it gained last week. While a strong rupee continued to play havoc with the fortunes of the IT sector, cyclical stocks attracted buying interest. However, the clear winners this week were PSU stocks. The BSE PSU Index was up 8.17 per cent. As for institutional investors, while FIIs bought equities worth Rs 187 crore, domestic mutual funds continued to be sellers this week, offloading equities worth Rs 30 crore.
The week started on a sour note with rumours about technology major, Infosys, facing pricing pressure from its clients, doing the rounds. Also, an appreciating rupee has become a sore point for the IT sector as strong Indian currency translates into less receipts from dollar-denominated revenue. While giving profit guidance for financial year 2003-04, most companies had taken the exchange rate to be Rs 47.40. The rupee, however, is trading at Rs 46.90 to a dollar at present. As a result, the BSE IT Index shed 11 per cent over the week.
With technology stocks in the dumps, market participants in search of triggers took to old economy stocks in a big way. Expectations of a good monsoon continued to rule the sentiment. Consequently, FMCG and auto index heavyweights registered substantial gains. Since demand for cement is said to be higher before the arrival of the monsoon cement scrips such as Grasim Industries (up 8.06 per cent) and ACC (up 1.87 per cent) generated enough buying interest. Banking stocks too continued to put up a good show. Yet another PSU bank, Oriental Bank of Commerce recorded almost 43 per cent rise in net profits in the financial year 2003 and is said to have the highest provisioning for NPAs amongst its peers. The stock moved up 14 per cent over the week.
Also, a good performance by SBI, IOC and ONGC saw the BSE PSU Index move up 8 per cent. However, the movement in divestment candidates, HPCL and BPCL, was divergent. Initially, rumours about public litigation against the two PSUs' disinvestment, which could delay the disinvestment, pushed the stocks down. However, the news that the government was planning to appoint a co-ordinator-cum-advisor for BPCL disinvestment saw the stock move up by 5.47 per cent, from the week's low of Rs 238. HPCL continued to languish though, shedding 6.28 per cent over the week.
As the dollar continued to depreciate in value, the US markets were down this week, with the Nasdaq losing 1.85 per cent and the Dow Jones registering a 0.80 per cent fall over the week.
Outlook
It is highly unlikely that there will be a change of guard in the disinvestment ministry during the cabinet reshuffle scheduled for Saturday. But if there is a change, it could affect the market sentiment. That apart, corporate results of some auto, banking and pharma companies are likely to pour in next week, which could see some stock-specific action. The fate of technology sector may remain uncertain, with strict entry restrictions for foreign software professionals being imposed in the US and the European markets. Nasscom says that this could create pressure on the Indian IT industry.
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