Bourses may witness narrow movements

By Oommen A Ninan

MUMBAI, JULY 30. Stock markets are likely to move in a narrow range. Foreign institutional investors (FIIs) were picking up selectively last Friday while they sold some. Information Technology stocks are again in the limelight as the old economy stocks lost its gleam after the first quarter financial performance.

``Friday's FII figures of Rs. 202 crores certainly indicate buying interest at lower levels. Therefore, I don't see any big drop in the indices from the current levels,'' said Mr. S.N. Rajan, Chief Investment Officer of Kotak Mahindra Mutual Fund. On the other hand a couple of days of buying will result in a sharp jump in prices. ``But as we have seen in the recent past any big jump immediately brings in profit booking and hence the rally will be short-lived,'' said Mr. Rajan, adding, ``We are going to see more such bouts of short durations.''

The only positive news on the macro front is the good performance by most Information Technology service companies. Most other sectors have not shown any signs of improvement. The results of fast moving consumer goods (FMCG) major Hindustan Lever point out the difficulty in top line growth. Bottomline growth is better due to operational efficiency.

``As there is no large buying from any quarters, markets may remain subdued in the coming week also,'' said Mr. V. R. Srinivasan, Managing Director of R. K. Chari Stock Broking. There is good news from Nasdaq eventhough lately Indian bourses no longer mirror the movement of Nasdaq. Nevertheless it has a psychological impact on the investors. Said Mr. Srinivasan, ``One thing that emerge clearly is that valuations of many software companies have to come to realistic levels. This is possible only through a process of consolidation since an organic growth has its own limitations in achieving higher growth.''

The outstanding position continues to remain at higher levels. With the National Stock Exchange's automated lending and borrowing mechanism (ALBM) to attract margins from next settlement, it remains to be seen if the operators reduce their exposure to ALBM.

The Bombay Stock Exchange 30-Share Sensitive Index (Sensex) closed last Friday at 4276.70, a loss of 186.96 points over the previous week's close of 4463.66. Compared to a high of 4905.94 on July 7, the Sensex lost 629.24 points till now. On the National Stock Exchange S&P CNX Nifty closed lower at 1333.80 against 1397.25 in the previous week, a loss of 63.45 points. ``The delinking of Indian bourses with Nasdaq seems to be complete. In spite of a fall on Friday it appears that the Indian market will gain on Monday,'' said Mr. Arun Kejriwal, a leading Equity Analyst.

``Confusing pattern of the market is creating a lot of uncertainties and one must trade with the protective loss. Monday will be the trend decider day for the market as the closing must be somewhere above 4445. Monthly close below 4445 will lead to major crash that may be upto 3900 or 3750 as at that time it will fail to close above the neckline of monthly head and shoulder,'' said Mr. Shrikant S. Chouhan, a technical analyst on equities. ``Investors should be stock specific,'' he added.

The Unit Trust of India (UTI) disclosed the portfolio of its largest scheme, Unit Scheme - 64 (US-64) for the first time. The important aspect of portfolio of the popular US-64 is that it has Rs. 10,910.50 crores or 52.98 of the net assets invested in equity shares of only 26 companies unlike in the past when it had a large basket of securities. Another large chunk of assets, Rs. 3,618.30 crores or 17.57 per cent is held in government securities (G-Sec). NCDs and term loans aggregate Rs. 838.16 crores or 4.07 per cent of the net assets of US-64.

There are two companies - ITC and Hindustan Lever - from FMCG accounting for 9.89 per cent or Rs. 1,079 crores of its equity portfolio. About 36 per cent of the equity portfolio disclosed is concentrated in 11 new economy stocks. These include Himachal Futuristic Communications, Infosys Technologies, Satyam Computers, SSI, Global Telesystems, MTNL, Visual Software, Zee, NIIT, Pentamedia Graphics, and VSNL. Among the 26 equities, Reliance Industries is the single largest investment accounting for Rs. 2,335 crores or 11.34 per cent of net assets. RIL and group firm Reliance Petroleum account for 17.45 per cent of net assets.

In the last week trading remained highly characterised by company specific developments, especially the quarterly results. Many annual general body meetings (AGMs) in the last two weeks were a disappointment as almost all of them were pointed out to a bleak future. The outlook in the cement, steel and automobile sectors are not encouraging. The recent survey conducted by Confederation of Indian Industry (CII) is not enthusiastic on higher growth rate. The Government has to think of some drastic measures to stabilise the economy and put it back on the growth path. Until this happens investors are unlikely to return to the market in large numbers.

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