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Wednesday, Dec 04, 2002

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Mid-term review, profit-bookings mar sentiment

S. Muralidhar

A not-so-flattering mid-year economic report released by the Government led to an outbreak of profit-bookings in most counters on the bourses on Tuesday. Strong selling pressure was witnessed in information technology counters as well as old economy stocks.

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The mid-year review of the Indian economy has forecast a lower 5 to 5.5 per cent growth rate for the gross domestic product (GDP) and has expressed concern over the rise in the fiscal deficit. The report, released by the afternoon, caused more damage to an already weak start of the trading session. The main 30-share BSE Sensitive Index (Sensex) crashed by 40.22 points by the end of trade to close at 3,230.14 points on Tuesday.

The Government's evaluation of the economy in the report has also cited the poor monsoon and the consequent drought situation in many States as one of the main reasons for the worsening of the fiscal deficit situation. The ten-month military stand off with neighbouring Pakistan and the general economic slowdown of the world economy have been quoted as the other reasons for the poorer showing of the economy. The Government expects agriculture to be badly hit by the failure of the monsoon this year. This drought effect is projected to pull down agricultural growth to one per cent from the previous year's 5.7 per cent.

The dampening effect of these numbers dragged down key barometer and old economy stocks such as those in the tractor industry and in the core sector. Mahindra & Mahindra, one of the leading tractor makers was down Rs 2.30 at Rs 104.85. Escorts was also hit by selling pressure and closed lower by Rs 2.20 at Rs 48.30. Punjab Tractors, which has been rising due to the proposed disinvestment programme of the Punjab Government's stake in the company, inched up marginally on Tuesday to close at Rs 134.80, up by Rs 0.75.

Other key index and non-index stocks that were hit by Tuesday's sell off spree were Hindustan Lever down Rs 1.30 at Rs 172.10, Reliance Industries down Rs 3.5 at Rs 290.65, ITC down Rs 0.75 at Rs 650.30, L&T down by Rs 4.80 at Rs 199.10, Tata Engineering down Rs 4.95 at Rs 163.35 and Tata Steel, which slipped by Rs 2.70 at Rs 136.25.

The NSE Nifty index also lost ground to close at 1,055 points on Tuesday, down by 12.90 points. Tuesday's trading volumes on the bourses were marginally lower than the previous session's on account of heavy selling, which in turn led to a decline in the prices of nearly two-thirds of all stocks.

Selling pressure was also accentuated by profit-bookings in most information technology and telecom stocks, many of which had gained considerably during the bull rally of the past two weeks. Amongst the major losers on Tuesday in this sector were Infosys Technologies down by Rs 92.10 at Rs 4,561.35, Satyam Computer down by Rs 13.05 at Rs 277.80, Wipro down by Rs 18.75 at Rs 1,708.55, Digital Global down by Rs 32.50 at Rs 590.80 and HCL Technologies down by Rs 6.35 at Rs 187.75.

The banking sector, which has been upbeat since the enactment of the Debt Recovery Act, was also hit on Tuesday, with some of the major counters such as that of State Bank of India, Punjab National Bank, Federal Bank, Corporation Bank, ICICI Bank and HDFC Bank either remaining unchanged or losing ground marginally.

Public sector undertaking stocks were also not spared on Tuesday. Amongst the losers were HPCL, BPCL, ONGC, Indian Oil Corporation, Gas Authority, Shipping Corporation of India, Dredging Corporation and National Aluminium.

Amongst the few gainers during the day were Madras Cements, Tata Infotech, Ramco Systems, Thermax, United Breweries, MICO, Hindalco, Grasim, Siemens, MphasiS BFL, and Nestle.

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