Bullish mood on bourses

By Oommen A. Ninan

MUMBAI, NOV. 4. The bullish mood is back on bourses as signs of economic revival continued in select sectors of the economy. The announcement of excellent second quarter results cheered the market.

After dipping on the first two days, stock prices rallied to close higher for the week. The benchmark Bombay Stock Exchange 30-share sensitive index inched up by 30.44 points to 3052.60 from 3022.16 recorded in the previous week. In the intra-day Sensex crossed 3100 on the last day of trading. On the National Stock Exchange, the S&P CNX nifty index moved up by 14.40 points to 997.60 from 983.20 in the previous week. Several stocks came under selling pressure in line with the global markets, but gained after the announcement of encouraging results from several heavy weight companies. Many low priced mid-sized companies remained in the limelight.

Among pharmaceutical companies, the financial results of Dr. Reddy's Lab were excellent and the stock hit the upper band after the announcement of results. ``However,'' Mr. Parag Shah, Milan Mahendra Securities, said, ``with nearly 70 per cent of its profits coming from Fluxotine sale in the U.S. during the exclusive period the stock could not sustain the higher levels due to institutional profit booking.'' Multinational pharmaceutical companies were in favour as several of them have announced encouraging performance in the second quarter. Novartis has gained sharply on announcement of encouraging results for the September quarter. Some pharmaceutical companies rallied on the last trading day on rumours of imminent announcement of the long awaited new drug policy of the Government.

Among the results announced, automobile companies have performed exceedingly well with several stocks gaining sharply during the week. However, Mahindra & Mahindra gained after announcing a loss, well below market expectations. Telco results have been good but the stock price came under selling pressure due to the company's ongoing rights issue. Booming conditions for two- wheeler manufacturers continued as they too announced excellent results followed by continuing higher sales in October. ``NRB Bearings' performance has been much better than our expectations,'' said Mr. Shah. Among the Birla group companies, Indo-Gulf Fertiliser has been excellent and its stock price gained last week. Mr. Shah said Raymond's performance for the quarter took the market by surprise. In spite of the delayed festival season this time, the performance of the company was good and is expected to perform much better in the current quarter.

Cement dispatches announced by ACC and Gujarat Ambuja at 14 per cent and 7 per cent respectively for October sent positive signals to the market. Further, the excellent results announced by the corporates at a difficult time proved the potential of domestic companies. Many good results are fruits of restructuring that happened in the Indian corporate world recently. Economy- related companies witnessed a dull market in the last four years. In 1997, Far Eastern economy collapsed. In 1998, oil prices crashed to less than $10 per barrel and Middle East stagnated. From 1999, economies around the world started slowing down. All these were happening around India while India itself was suffering from several natural calamities like cyclone, flood and drought. The last two years witnessed severe drought which brought down agricultural production drastically and affected the rural economy.

The economy stagnated to the extent that, in the last four years, not a single fertilizer plant came up or in other words investment in core sector and infrastructure remained almost nil. Sectors such as steel, cement and power suffered a negative growth. This changed the attitude of many sleeping giants in the private sector. The restructuring of Larsen & Toubro (L&T) is an interesting story. ``L&T could forsee this scenario three years ago and launched several projects seeking business outside India,'' said Mr. A. M. Naik, Managing Director & Chief Executive Officer of L&T. This required transformation within the company to improve quality and major initiatives were taken up to re- orient the company's focus.

There are many reservations in advanced countries to buy high- tech engineering products. ``L&T was improving its products, image, brand and quality and received orders from the U.S., Canada, France and other European countries,'' said Mr. Naik. Now L&T is having more than 30 offices worldwide and has targeted to build up sizable activity outside the country. Around 25 per cent of its sales is from outside India. L&T is India's cement leader, with over 12 million tonnes installed capacity. It has initiated a transformation process to ensure that it emerges as a knowledge-based premium conglomerate in the shortest possible time. Its portfolio consists of an engineering core and thrust areas are cement, information technology and communications.

India needs its own multinationals and L&T is having tremendous potential to achieve that. Mr. Naik said ``our vision is L&T shall be a professionally-managed Indian multinational, committed to total customer satisfaction and enhancing shareholder value.'' The nation becomes stronger not only by Government's efforts but also by the very Indian company striving to become a multinational which can bring wealth to the country.

Send this article to Friends by E-Mail

Section  : Business
Next     : Firm trend on Lyons Range