The Hindu : Bank stocks steal limelight

Online edition of India's National Newspaper
Monday, May 05, 2003

Business

Business

Bank stocks steal limelight

THE STOCK markets witnessed low volume activity throughout last week indicating lack of interest among participants. Use of technical analysis helps to an extent in minimising the risks inherent in investment. Equity investments, by their very nature, carry a great deal of risk. However, adequate diversification, proper money management, choice of quality scrips and an ability to be patient can reduce this risk considerably. Expectations of investors too need to be realistic. "They will need to be satisfied if their equity returns show a small mark-up to debt market returns. This mark-up is to compensate the equity investor for the risk that he takes," said M. K. Srivatsan, Technical Analyst, Darashaw Broking.

Buying interest in information technology and select old economy stocks kept the markets firmly in the positive territory during the week ended May 2. The banking sector outperformed the market. After the announcement of the Monetary and Credit Policy by the Reserve Bank of India, bank stocks were in the limelight. State Bank of India, Bank of Baroda, Bank of India, Punjab National Bank, Oriental Bank of Commerce and Canara Bank recorded solid gains. Other bank stocks gained in the range of 2-4 per cent.

Oriental Bank of Commerce touched its 52-week high of Rs. 92.30 on Friday. Earlier, the bank had announced its plans to reduce its equity by 25 per cent. At present the Government holds 66 per cent. After the equity reduction exercise, it will come down to 54 per cent.

In the early part of the week, technology and pharma scips ruled weak following disappointing results by HCL Technologies and Cipla. But at the fag end of the week, the Infosys counter witnessed heavy buying following reports in the early part of the trading on Friday that the company bagged a large order from a U.S. based telecom major. This impacted other IT counters also.

Sustained buying in technology stocks, which outperformed heavyweights, and stock specific interest in select old economy stocks enabled the markets to close the week on a positive note.

On Friday, hectic buying was in evidence in select old economy and top ranking technology stocks on sustained buying by institutional investors.

The FMCG major Hindusan Lever, which has a heavy weigtage in the index, went down by nearly 4 per cent and closed at Rs. 138 on Friday. Medium to marginal losers were Grasim, Reliance, Zee Tele and ACC.

Hero Honda and Bajaj Auto closed in the positive terrain after both companies announced better than expected performance in April.

In the pharma sector, Ranbaxy and Wockhardt lost ground while Glaxo and Dr. Reddy's Laboratories gained.

Kochi Refinery hit the upper circuit limit on Friday following excellent results and the announcement of 100 per cent dividend. This led to a rally in other refining stocks such as Chennai Petroleum and Bongaigaon Refinery.

The announcement of quarterly results have been driving market sentiment. The market now needs large fund inflows to change the sentiment. Till then it is expected that the Sensex will remain range-bound with a strong support at 2,900.

The Sensex is in a bear market since February 2000 and, from a longer-term perspective, is in the process of finding a sacrosanct bottom. Any rally from these levels would give returns much in excess of what the normal debt market schemes have to offer. Another aspect that investors would do well to note is the reluctance of long term Government of India Securities (G-Sec) yields (ten years) to fall below 5.86 per cent. The RBI in its Credit Policy has mentioned that the potential for significant decline in Yields is now limited. "As a result," Mr. Srivatsan said, "equities have attractive upsides from a risk-reward perspective as compared to a debt scheme".

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