Markets: Range-bound trade to continue on Indian bourses

Monday, 05 May 2003, 19:30 IST
Printer Print Email Email
MUMBAI: The overall trading pattern in the Indian stock market is expected to remain choppy in the week ahead with institutional investors resorting to share-specific buying in the absence of any positive trigger. Analysts and market traders say there is little incentive to significantly enlarge position on heavyweight counters in the coming sessions and, therefore, the fund managers would prefer to put on hold major investment plans. "With the corporate earnings season behind us now, the overall market mood will continue to be lacklustre in the days ahead. One shouldn't expect any fireworks on the bourses in the short-term," said a fund manager with a foreign brokerage firm. "But selective stock buying will continue and that will make sure that the market index stays in positive territory. Of course, the gains won't be much but I don't see any pullback in the overall market trend." The stock market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed for the week on Friday at 2,966.63, representing a gain of 42.60 points or 1.46 percent over its previous week's close. Analysts say lack of any trigger on the economy front and the prevailing concern over the spread of SARS (Severe Acute Respiratory Syndrome) in the Asian region and its economic fallout would also weigh on the investor mind. "When there isn't any singular trend in the market, investors tend to worry more about the negative factors that can create some sort of negative impact on the market activity," said a broker with the Bombay Stock Exchange. "Yes, SARS is a cause for worry at this stage and we have already seen how it has spoiled the party in almost all major bourses in the Asian region. But closer home, I think the economic factors will also hover over investors' mind. "And currently the prime concern over the economic front is the prediction of a below-normal monsoon this year by the weather department." A section of dealers, however, believe that the market may gain strength in the week ahead on follow up buying in technology shares that had been badly battered in last few weeks' trade. The first batch of quarterly results, particularly from technology companies, has turned out to be disappointing. Selling on technology stocks was triggered a couple of weeks' back after two India's leading software makers - Infosys Technologies and Wipro - admitted that pressure on prices would continue to damage margins in the months ahead. The financial performance of companies like Wipro and Infosys are treated as the barometer for India's high-profile software industry's health. Experts say the softening demand and intense pricing pressure would ensure that the differential annual profit growth rate between the once robust IT and other sectors is not going to be as high as before in the years ahead. "If the bargain hunting in badly beaten down share of software companies, which started on a cautious note towards the last weekend, gains momentum in the week ahead then investors may get some reason to cheer," the stockbroker added. In the intra-week trade ended Friday, the market opened the week slightly higher on selective institutional buying in shares of old economy companies, as investors churned portfolio to pare their exposure in tech stocks. The market mood was also boosted by the Reserve Bank of India's (RBI) decision to reduce benchmark interest rates to ensure that banks have enough money for lending when economic activities pick up in the current fiscal. In a widely expected move, the central bank Tuesday cut the key bank rate and cash reserve ratio (CRR) by 0.25 percent points in its monetary and credit policy for fiscal 2003-04 beginning April 1. The Indian industry has been pitching for lowering of the benchmark bank rate and CRR for the last few months in view of the sluggishness in the overall economy and relatively lower level of credit off-take. The positive trend continued all through the week and it gained ground towards the weekend on speculative buying in shares of software makers. Buying in badly battered shares of software companies was triggered by rumours that Infosys Technologies, India's largest listed software maker, had bagged a huge software services order from a U.S.-based company. In the old economy sector, Hero Honda Motors, India's largest motorcycle maker, rose nearly five percent over its previous week's close to 205.80. The buying in Hero Honda stocks was triggered by reports that it sold a better-than-expected 134,318 bikes in April this year, a slight dip from 134,801 units sold in April 2002.
Source: IANS
siliconindia