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Tuesday, Dec 07, 2004

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Partial sell-off in IT stocks dampens mood

S. Muralidhar

AFTER breaching their all-time high levels during the last few sessions, the stock markets continued to stay rock steady on Monday. The major indices were actually set in mode for another round of increases during the first session of the week.

But profit-bookings in information technology stocks dampened the enthusiasm during the latter part of the day.

Despite the lacklustre performance of a number of information technology stocks, the indices closed the day at near previous close levels, an indicator of the potential strength of the current rally. However, the lack of sustained buying support at higher levels of the benchmark indices could also be an indicator of the lack of any new positive indicators or to some extent even an indicator of the setting in of hesitancy in the minds of the investor.

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This was also evident from the yo-yoing level of buying support that the indices reflected during Monday.

The session started on a strong note and both the benchmarks the BSE Sensex and the NSE's S&P CNX Nifty opened higher than their previous close levels.

The rise in the index, however, could not be sustained later during the day and at one point midway during the session, the indices slipped back into the red.

Despite the increase in institutional buying during the second half of the session, the partial sell-off of information technology and select banking stocks led to a dulling of the positive sentiment in the other index constituents that could have had a salubrious effect on the indices.

At the BSE, the Sensex hit a record new all-time high of 6,386 points intra-day before profit-booking in about half the index constituents pulled down the benchmark to a close of 6,322 points, the same level as the previous day's close. With that close, the full market capitalisation of the Sensex stocks crossed the Rs 7 lakh crore mark again and there were an equal number of gainers and losers amongst the 30 index constituents.

At the NSE, the story was not much different with the S&P CNX Nifty index sliding by a marginal 0.15 per cent compared to its previous close of 1996 points during the end of day's trade, after hitting an intra-day high of over 2,010 points.

The major gainers during the day from amongst Sensex stocks were ACC (up over four per cent), BHEL (up over five per cent), Dr Reddy's Laboratories (up two per cent), Grasim Industries (up 2.5 per cent), Hero Honda (up 2.6 per cent), HLL (up over four per cent), Ranbaxy Laboratories (up over 4.5 per cent) and Zee Telefilms (up nearly 4.8 per cent). The other gainers included HPCL, HDFC, ICICI Bank, Tata Steel and Tata Motors.

Amongst the losers were Bajaj Auto, Bharti TeleVentures, HDFC Bank, Hindalco, ITC, Infosys Technologies, L&T (down over 3.9 per cent), Maruti Udyog, State Bank of India, Wipro and ONGC.

The stocks of Reliance Industries and Reliance Energy still seemed to be reeling under the influence of the ongoing spat between the two Ambani brothers - Mukesh and Anil. Both the stocks closed in the negative with losses of over two per cent each.

The lacklustre sentiment in the stocks is unlikely to improve until the two feuding brothers draw out an amicable solution to the issue of ownership and shareholding in the Reliance Group companies.

The BSE TECk index closed the day in the red, reflecting the poor performance of IT and entertainment stocks. Amongst the major losers from these sectors were Hughes Software, i-flex Solutions, MTNL, Moser Baer, NDTV, Polaris Labs, Satyam Computers, VSNL, Wipro and TV Today.

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