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Saturday, January 13, 2007

Dramatic bounce back for the market


There was some dramatic action in the market this week. While the market saw significant falls on three consecutive days starting Monday, it bounced back with a vengeance on Thursday by posting robust gains of 268 points. There were some fears of we heading for a serious correction when the Sensex lost round about 500 points from last Friday’s close till Wednesday’s close. In the light of these developments, the 268 points gain on Thursday came as a breather. Friday’s gains were all the more euphoric. The Sensex and the Nifty both touched their all time highs on the day gaining 425.82 points and 110.20 points respectively at closing.

The Sensex closed Friday at 14056.53, up 196.01 points over last Friday’s closing. The Nifty closed at 4052.45, up 69.05 points over the week.

On Monday, January 8, the Sensex corrected 208.37 points to settle at 13652.15. There was correction across all Asian indices on the day and our bourses were not spared either. The fall in the BSE Mid-mid cap index was comparatively less severe at 0.4% as against Sensex’s 1.5%. We had the BSE Small-Cap index actually rising on the day by 0.8%. This can be seen symbolic of the action moving from large cap stocks to small caps and mid caps, something that market men have been anticipating for a while. IT, telecom and auto shares came down sharply on Monday.

The correction phase extended to Tuesday as well with the Sensex losing a further 85.82 points to close at 13652.15. The IT sector again played a role in the fall. With the rupee appreciating, there were concerns about companies in the sector being able to maintain their profitability levels. Many felt that it was purely a technical correction and expected the markets to pull back on Wednesday after two days of sluggishness. But they were proved wrong, as there was a further decline of 204.17 points or 1.5% in Sensex on Wednesday. There have been reports about hedge funds selling Asian equities to offset the losses incurred by them on account of a sharp 9% fall in oil price since the beginning of 2007. On the day, Nifty’s strong resistance at 3900 was broken and the closing was well below that level at 3850.30, down 1.5% over the previous day’s close.

The correction sentiment reversed finally on Thursday when the Sensex gained 268 points. The gains were based on short covering of positions and market men opined that one could not infer the bull run having resumed on the basis of Thursday’s gains. But come Friday, and the Sensex sky rocketed to close above the psychological mark of 14000 while Nifty too crossed its psychological 4000 mark. And this time the gains were not defensive. They came on a build up of fresh new long positions.

On Friday, the BSE Small Cap index closed at 7278.33, posting a gain of 180.15 points over last Friday’s closing. The BSE Mid Cap index closed Friday at 5974.64 points gaining 38 points over the week.

Among individual stocks, Infosys was in the news for its quarterly results. The results were as per market expectation but over the week, the stock has been a loser by Rs.52.45. The stock closed Friday at Rs.2222.35.

Index heavy weight Reliance Industries gained 4% over the week to close at 1340.10. Its Q3 results are to be announced on January 18.

Reliance Communications was down Rs.13.40 over the week. It closed Friday at Rs.433.75. On Wednesday, the company’s board approved a foreign currency convertible bonds (FCCBs) of up to $1 billion in one or more tranches.

ICICI Bank’s dollar-denominated, three-tranche debt offering reportedly received strong response. The transaction, expected to raise at least $300 million, has attracted orders worth over $2 billion. The stock rose by Rs.59.70 over the week to close at Rs 970.10.

HDFC Bank came out with its third quarter results on Thursday. It has reported 31.7% growth in net profit for Q3 December 2006 at Rs 295.64 crore. The net profit was within market expectations. Net interest income has risen a 38.4% to Rs 928.63 crore (Rs 670.61 crore), beating market expectations. The stock closed flat at 1.63.25, just 0.87% above its previous week’s close.

Despite falling crude prices, ONGC stood at Rs.924.85 on Friday, up Rs.28.90 over its previous week closing. Other oil PSUs HPCL and BPCL also did well. HPCL closed at Rs.304.15 up Rs.6.80 while BPCL was up by Rs.16.95 at Rs.368.70. The last trading day of the week was particularly good for the oil companies.

IFCI soared this week on the back of it selling a part of its stake in NSE for $160 million. The company plans to utilize the money for lending to AAA rated companies. The stock shot up to Rs.21.82, gaining 67% over last Friday’s close of Rs.13.06.

TV Today gained 15% over its previous week’s close to settle at 96.85. The gains came following a bulk deal amounting to a stake of 1.3 per cent in the company.

Zee Telefilms demerged its news business to Zee News Limited (ZNL) and the cable business of the company and that of Siti Cable Network, to Wire & Wireless (India) Limited (WWIL). Zee News closed the week at Rs 29.95 while Wire & Wireless settled at Rs 122.10.

In the IPO segment, Cairn India got listed on Tuesday, January 9. It listed at Rs.140, which is 12.5% below its issue price of 160. The stock traded at a discount through out the day to finally close the day at Rs.137.50. The issue had not got a good response on subscription and the down beat sentiment was reflected in its listing as well.

On the other hand, Shri Ashtavinayak Cine Vision, which got listed a day after the Cairn India IPO did quite well. Its IPO price was Rs.160. The stock did well despite the bearish market sentiment on the day. It closed the day 66.50 points above its IPO price at 226.50. The company is in the business of movie distribution and is said to have a good track record.

As per data available till Thursday, mutual funds were net sellers in equities to the tune of Rs 887.20 crores. FIIs until Wednesday, were net sellers to the tune of Rs.4549.80 crores.