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Markets Lacklustre

The September 2004 quarter results have not set the market on fire as it meanders to find direction. Oil prices, inflation and interest rates weigh heavily on the minds of investors

The result season is not going as well as expected for a lot of investors. After a pre-result run-up that lasted till the first week of October, the markets are moving sideways. This week, the markets closed marginally lower with the BSE Sensex declining 0.8 per cent and the Nifty falling 0.85 per cent. Even the broad-market index the S&P CNX 500 lost 0.72 per cent. Mid-caps did not fall as much as the large-caps and closed the week down 0.23 per cent.

The market seems to be looking for direction and is undecided on what direction to take. The results have not provided any direction to the markets. There is also a decline in interest and the turnover declined by 8 per cent after a 17 per cent decline in the previous week.

The market is cowed under worries on oil prices and its impact on the economy and industry. On Monday, the Sensex declined 6.9 points in a lacklustre trading session. On Tuesday, oil prices eased and the Sensex gained 58 points. The gains didn't stay as the Sensex shed 65 points on Wednesday along with other emerging markets, due to fears of an interest rate hike in the US. On Thursday, the Sensex shed 32 points ahead of a long weekend.

In sectoral indices, the BSE Healthcare Index gained 0.3 per cent as the results of pharma companies have been good and the sector is a good defensive bet when oil prices are rising. The BSE Bankex also gained marginally as the impact of declining treasury profits seems factored in the price of bank stocks. The BSE FMCG Index declined 2.1 per cent. The major gain seen in tech stocks in the previous week did continue this week. The BSE IT Index declined 1.9 per cent. Satyam Computer's 28 per cent rise in net profit for the second quarter failed to cheer the market and the stock declined.

Reliance Energy, Gujarat Ambuja and Biocon came out with good results. Bajaj Auto's results didn't impress the markets. Some of the mid-caps have come out with impressive results. Among the major news of the week, HDFC Bank announced that it was planning a $300 mn ADS issue. The government said it would allow 49 per cent FDI in domestic airline companies. Alliance Mutual Fund schemes were sold to Birla Sun Life Mutual Fund.

Outlook

In the coming week, most results would have been announced and we will know if there are any surprises. So far, barring a few mid-caps there are few positive surprises. Besides results, the markets will be governed by oil prices, inflation rate, and the Monetary Policy on Tuesday, which could see a rise in the interest rate. Investors are likely to favour sectors like technology and pharma, which are not affected by rising oil prices. Banking stocks will be in the spotlight this week because of the monetary policy.