BUSINESS LINE's INVESTMENT WORLD
From THE HINDU group of publications
Sunday, February 25, 2001













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Markets land on negative terrain

S. Vaidya Nathan

THE past week has not been a good one for the markets.

There has been widespread losses with much of it coming in the later part with a 3.3 per cent fall on the last trading day of the week. For the week, the broad markets indices such as the Business Line 250 and the S & P CNX 500 have declined by close to 5.2 per cent. The narrow benchmark indices such as the S & P CNX Nifty and the BSE Sensitive Index have declined less by around 4.4 per cent.

The decline in the week came amidst fairly strong trends in FII inflows. FII inflows for the month has risen to $ 331 million. FII purchases has been to the tune of Rs 5,210.2 crore and sales Rs 4026.9 crore. The net purchases in February is Rs 1626.7 crore. The FIIs have so far invested $ 1.25 billion in 2001 in Indian equities. The pressure from sales by domestic mutual funds to the tune of Rs 1269.93 crore has neutralised the strong inflows from FIIs.

During the past week the decline has been across the board. In the previous week, the tech stocks had suffered a modest decline of around 2 per cent. But in the past week, the tech stocks suffered a decline of close to 11.5 per cent. There appears to be little respite as far as stocks in this sector go. Frontline stocks, such as Infosys, have suffered a sharp decline. But the story in the tech sector has been the swift fall from grace of Aptech. Following an announcement that it would de-merge its software division and merge with a closely held company, Hexaware, the stock appears to have gone into a free fall. Till the swap ratio and financials of Hexaware are known, the stock may be in for an uncertain period with a downward bias.

The old-economy stocks - cutting across sectors and ranging from oil, steel, engineering and paper have - have suffered losses. The decline in these stocks has wiped out some of the gains that they posted in the first few weeks of 2001. These gains had come on the back of strong institutional buying as investors sought to diversify their portfolio. Ahead of the Budget due to be presented on February 28, investors and speculators seem to have gone on a selling mode and taken advantage of the uptrend to book profits. Tata Tea has been a prominent loser with the BL Plantations Index shedding close to 17 per cent.

In much the same vein, the finance sector stocks have also gone through a similar phase. For the second week running, stocks of public sector banks and financial institutions have taken a knock. Here too, profit booking seems to be the order of the day. Any announcement of disinvestment candidates for the 33 per cent stake level may trigger some interest in the stocks in question. Else price weakness may continue to envelop stocks.

The automobile sector has also seen sharp losses. The gains posted in the past fortnight appear to have been frittered away with Tata Engineering slipping to the below-Rs 100 levels again. The short uptrend sparked by better sales levels in January as compared to December appears to have petered out. Stocks in other segments of the automobile industry have also suffered a similar fate though to a lesser degree.

A few sectors, such as sugar and shipping, have been gainers perhaps in anticipation of favourable policy initiatives in the Budget. Overall, an uncertain week may lie ahead with possibility of a downtrend unless the Budget has some notable initiatives capable of being translated into reality.


Section  : Markets
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Next     : How the broad market indices and
           industry-wise indices moved during the week

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