The Hindu Business Line : Basket selling triggers collapse

AFTER a long time almost all the index stocks - both in the BSE Sensex and S&P CNX Nifty - closed lower from previous day's close. Among the Sensex constituent, only Gujarat Ambuja Cement closed higher; in the S&P CNX Nifty, while Dabur Pharma closed higher, Sun Pharma closed on a flat note.

The talk is that the heavy sell-off in the index stocks was due to basket selling of the indices. Under basket selling, an investor can sell a group of stocks in its portfolio.

Dealers said the selling came mainly from hedge funds, which had exposure in index stocks. The selling from hedge funds came when the BSE Sensex was down around 150 points and their selling led to fall of Sensex by over 300 points.

However, once the basket selling was complete, indices recovered partially.

... but tea stocks remain hot

ON a day when there was across-the-board selling in the market, some tea stocks bucked the trend. Dealers said bright prospects for the commodity fuelled buying interest in tea stocks.

Tea prices, which are high in the current fiscal, are expected to remain firm during the next year too.

The firmness in tea prices is due to fall in output amidst strong demand. This would result in a fall in tea inventories during the next fiscal at a time when tea production is expected to edge down.

But active interest in tea stocks is largely in small- and mid-sized companies causing some concern among select market players.

Among the stocks to rise on Wednesday include Assambrook (up 9.14 per cent at Rs 32.85 on BSE), Williamson Magor (up 5.88 per cent at Rs 27), Goodricke (up 2.94 per cent at Rs 66.60) and Jayshree Tea (up 2.51 per cent at Rs 102.25).

Betting on performance

ZICOM Electronic Security Systems was another mid-cap stock that bucked the overall market trend on Wednesday. It gained 2.8 per cent at Rs 108.40 on the BSE with volumes of 3.21 lakh shares.

Dealers said the company is expected to show good performance in the December quarter.

The talk is that in the last quarter, the company bagged several orders from multiplexes and shopping malls.

The launch of company's new security service for residential complexes has also been received well.

The talk is that in the December quarter, the growth of top line and bottom line would be around 25 per cent over the previous quarter (September 2004 quarter).

Virendra Verma

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