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Thursday, Oct 21, 2004

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Sustained selling pressure drives Sensex down

S. Muralidhar

AFTER witnessing a strong rally on Tuesday, the stock market indices took a beating on the third trading day of the week. The steep fall in the indices was largely due to the strong wave of selling pressure that built up steam starting mid-session on Wednesday.

The rise in prices at a number of counters amongindex heavyweights during the past few sessions was probably the reason for the sudden spurt in profit booking during Wednesday's session.

Most institutional investors seemed to be in profit booking mood and except for a few counters in the A group and other index stocks which closed the day with gains, the rest were all headed southward. Abetting the negative sentiment was the announcement of a few not-so-convincing corporate earnings numbers.

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The indices opened the day at nearly the previous close levels and there was a discernable sense of hesitancy amonginvestors right up to the middle of the session, till which time, the indices were fluctuating within a narrow band just below the previous day's close. But, even as the indices seemed to break back into positive territory by mid-session, a sustained wave of selling pressure kept pushing down the indices into a steady downward spiral.

The 30-share Bombay Stock Exchange Sensitive Index (Sensex) opened the day at 5,738 points and after a brief rally touched 5,750 points. But, profit booking pushed the index down to a low of 5,662 points before it finally settled down to a close of 5,673 points, down 1.13 per cent over its previous close.

There were a total of 25 stocks that declined on Wednesday's session, compared to the remaining five that posted gains. Traded value of Sensex stocks at about Rs 887 crore was also much lower than the average of the past few trading sessions.

In terms of the sectors, some of the biggest losers on Wednesday's session were information technology, pharmaceuticals, auto, and banking. In addition to these sector specific trends, there were a number of index heavyweights such as Reliance Industries and Wipro, which slid on Wednesday leading to a further fall in the indices.

Among the biggest losers in the Sensex was Bajaj Auto, which announced an 11 per cent fall in net profit for the second quarter of the current fiscal compared to the corresponding quarter of the previous year. The company's operating profit margin has also taken a hit, but this is largely due to the increase in development costs incurred for its new bikes such as the new 125cc Bajaj Discover.

However, while the fall in profitability seemed to have been the reason behind the stock's slide into the red on Wednesday, the point that also needs to be noted is the fact Bajaj's sales revenues and volumes during the second quarter of this fiscal have increased compared to the first two quarters of the previous fiscal.

The company's market share in the motorcycle segment has also inched up by about 4 per cent to about 28 per cent during the quarter ended September 2004. The stock was down 2.29 per cent on Wednesday.

Among the other losers from the Sensex 30 were Bharti TeleVentures, Cipla, Dr Reddy's Laboratories, Grasim Industries, HDFC Bank, Hindalco, HLL, HPCL, HDFC, ITC, ICICI Bank, Infosys Technologies, L&T, Maruti Udyog, ONGC, Reliance, Reliance Energy, Satyam Computer, State Bank of India, Tata Steel, Tata Motors, Tata Power and Wipro. The few Sensex stocks that posted gains on Wednesday were Zee Telefilms, ACC, BHEL, Gujarat Ambuja Cements and Ranbaxy Laboratories.

While there were a number of public sector undertakings that closed the day in the negative, a few did manage to post gains on the back an increase in buying support.

Some of the oil sector stocks were in demand due to the easing of international crude oil prices during the last two days. Among the PSU gainers were Bongaigaon Refineries, Chennai Petroleum, GAIL India, Container Corporation, Balmer and Lawrie and Bharat Earth Movers.

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