Markets Outlook: Shares to track Iraq developments

Monday, 24 March 2003, 08:00 Hrs
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MUMBAI: Indian share market investors are expected to closely track developments on the Iraq war front in the week ahead before rushing to the trading ring to pick up blue-chip equities.

As the U.S. and Britain unleash a devastating air assault on Baghdad and other cities in Iraq, analysts and traders here say the market operators would continue to pick up heavyweight counters on hopes of a swift end to the war.

A section of dealers, however, say the market may witness some profit taking in the days ahead on stocks that have staged smart rally in last few sessions on fresh institutional buying.

For the week, the market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed on Saturday at 3,218.73, representing a gain of 110.49 points or 3.55 percent over its previous week's close.

The Bombay Stock Exchange organised a special two-hour trading session Saturday as the National Stock Exchange was testing back-up trading facilities. The Bombay exchange remained open between 11:00 a.m. and 1:00 p.m.

"The Iraq war is going to be the only factor that will weigh on investors' mind in the week ahead. The war will overshadow all other developments," said a fund manager with a foreign brokerage firm.

"In last week's trade, investors picked up heavyweight counters, which had dropped lower on massive selling pressure, on hopes that military action against Iraq will be swift with little damage to oil supply and the global economy.

"Whatever reports that are coming from the scene of action, I think this trend will continue in the coming sessions unless something negative happens over the weekend," the fund manager told IANS.

For months, the prospect of military action against Iraq, which has the world's second-largest oil reserves after Saudi Arabia, has driven up oil prices and weighed heavily on the financial markets across the globe.

Analysts say while India may manage to absorb the impact of a short war with little damage to oil supply, a long and messy military campaign would result in soaring oil prices, quashing the economy's attempts to right itself.

"Most investors and fund managers are saying it will end soon, probably within a week or ten days. If that actually happens, it will be good for stocks," said a stockbroker with the Bombay Stock Exchange.

"If the war is short and inflicts limited damage on oil flows, then I think the consumers will return to the bourses because most of the heavyweight stocks have come down to attractively lower levels," he added.

A section of market watchers, on the other hand, warned against excessive optimism that the conflict would be over quickly.

"The overall market sentiment would continue to be cautious, as investors wait for the war to get over before rushing into the trading ring for bulk buying," said the fund manager.

In a holiday-truncated intra-week trade ended Saturday, the market opened lower on uncertainty over the timing of the U.S.-led military attack on Iraq. The stock market was closed Tuesday for Holi, the festival of colours.

The index, however, soared sharply higher Wednesday as bruised investors bet on a quick resolution of the imminent U.S.-led military strike on Iraq.

The market managed to stage a moderate rally with investors resorting to bargain hunting after President Bush's ultimatum to Iraq cleared uncertainty that had hung over global markets for months.

The rally gained ground in the remaining sessions of the week after the U.S. and its allies launched a war to disarm Iraq.

"A relief rally in blue-chip equities was perfectly in order after the military strike started on Iraq, ending months of uncertainty. Markets hate uncertainty whether it's a war or political turmoil," said the broker.

The market sentiment was also boosted by the return of the foreign institutional investors into the trading ring.

Foreign funds, which act as the backbone for India's liquidity starved capital market, bought shares for a net $50.4 million in the past two days to Thursday, after dumping shares worth $34.7 million in the previous three days.

In the technology sector, Hyderabad-based Satyam Computer gained 8.01 percent over its previous week's close to touch 210.95 after the company announced the launch of its offshore solutions centre in Chennai.

The new centre will cater to the IT service requirements of U.S.-based TRW Automotive, one of Satyam's largest customers.

HCL Tech, a New Delhi-based software development and services major, rose nearly seven percent to 165.55 after the National Association of Software and Service Companies said a short war in Iraq would have no impact on India's IT industry.
Source: IANS
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