The Hindu Business Line : Auto sector stocks in demand

STOCK prices rebounded after five successive days of losses with the Sensex registering a gain of 1.6 per cent. The bounceback gained strength in early trade as Sensex rose to a level that was a hair's breadth away from 5,000 points.

Thereafter, the rally fizzled out and the Sensex could hold on to a gain of only about 75 points. The day belonged to large-cap stocks and IT stocks, which emerged as a safer haven, under performed. The Nifty gained 1.64 per cent, while the CNX Midcap 200 and the CNX IT gained only about 0.90 per cent.

The star performers of the day were, however, the auto sector stocks. Four-wheeler manufacturers such as Tata Motors, Maruti Udyog and Mahindra & Mahindra, two-wheelers makers such as TVS Motor, Bajaj Auto and Hero Honda along with auto component companies such as Sono Koyo Steering, Motherson Sumi Systems, Rico Auto, MICO and SKF Bearing recorded large gains. The stock price rise was supported by news developments too. Maruti Udyog reported a 24 per cent rise in sales in April-May 2004 over the previous year. HSBC Global Investment Fund's holding in Mahindra & Mahindra crossed the threshold of 5 per cent. Hero Honda had listed in its announcement that it is considering the renewal of the licence agreement on Wednesday. The only jarring note was struck by the announcement by TVS Motor of a substantial drop in sales volumes in May 2004. The market however preferred to ignore the development and the stock price vaulted by 8 per cent.

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Stocks of a few public sector companies, which were hammered over the past few sessions, also recovered part of the lost ground. Stocks such as HPCL, which declared a dividend of Rs 22 per share on Monday, Indian Overseas Bank, Corporation Bank, Chennai Petroleum and GAIL India clocked gains of more than 7 per cent.

Other stocks to gain include Tata Chemicals and Hind Lever Chemicals, Monnet Ispat, Bharat Bijlee and Avery India.

The stock of Tata Chemicals, which is to be merged with Hind Lever Chemicals, shot up on the announcement that the court has sanctioned the scheme of amalgamation.

The stock of Monnet Ispat spurted in the wake of the announcement that Citicorp International Finance is picking up a stake in the company at a price, which is nearly 26 per cent more than the closing price on Wednesday.

The stock price of Bharat Bijlee strengthened by 5 per cent in the backdrop of the sale of its field operations business to an outfit owned by Kone Elevator for a consideration of Rs 47 crore.

The stock of Avery India flared up by 13 per cent with the company announcing that it is considering another proposal for a buyback. Promoter buying also perked up stocks of Bajaj Auto and Usha Beltron. The stock of MTNL gained 5 per cent. The National Stock Exchange has sought clarifications from the company in response to reports that BSNL may be merged with MTNL.

Losers during the day included stocks such as Jubilant Organosys and Perfect Circle Victor.

The stock of Jubilant Organosys declined by 6 per cent even as the company announced that it had purchased a Belgium firm for 13.5 million euros in cash.

The proposal for a stock split from Rs 8 to Re 1 failed to perk up the stock of Perfect Circle Victor. The stock slumped by 8 per cent.

High dividend yielding stocks such as Blue Star, GE Shipping and Gujarat Narmada Valley Fertilisers also lost value. Banking stocks such as ING Vysya Bank, HDFC Bank and Bank of Baroda also shed value.