The Hindu Business Line : Markets this week

Political turmoil over the civil nuclear deal took centrestage this week, with both Left parties and the SP playing their cards close to the chest. Investors, driven by stop-go signals were evenly poised as the Sensex on Monday was up by around 350 points on intra-day trade, but pared the gains to finish at 13525, up with just 70 points.

Software companies led the market up on hopes of strong quarterly earnings, with weaker rupee seen helping revenue. Infosys Technologies, which was set to report first-quarter earnings on Friday, rose 2.6 percent to Rs 1,801.20.

Consolidation hopes gave a fillip to airlines stocks which received a battering in the past few days on soaring ATF prices. Spicejet rebuffed the UB group interest, and instead opted for PE investor, WL Ross & Co LLC.

Sensex recovered from the day's low on Tuesday as the political stand-off ended with the Left withdrawing support to the UPA regime. Hopes of government survival, and end to the uncertainty over the Left support tilted the sentiment in favour of the markets.

With the political stalemate dissipating, market-men were optimistic that Government may hasten the process of signing the proposed Indo-US nuclear deal. This lifted the sentiment for power stocks.

The Allahabad High Court decision, upholding a State Advised Price of Rs 125 per quintal for cane procured in Uttar Pradesh in the 2007-08 season, would require UP sugar producers to reverse a portion of their reported profits for 2007-08. This negatively impacted the UP-based sugar stocks such as Bajaj Hindusthan, Balrampur Chini Mills, Triveni Engineering and Dhampur Sugar Mills.

For two days in succession oil prices fell, and with a perceived political stability at the centre, the Sensex opened on Wednesday with a hefty gain of 550 points. With a brief fall on intra-day, the markets never gave-up and finished the day with a spectacular gain of 640 points at 13990.

Rising inflation, political uncertainties, and spurt in oil prices have compelled many foreign brokerages to downgrade Indian firms. Lehman Brothers, Credit Suisse, Morgan Stanley, HSBC are some of the brokerages that have done this. The downgraded companies are mainly in the capital goods and financial services sectors.

Mundra Port and SEZ hit the upper circuit limit on Wednesday and closed at Rs 554 after the Supreme Court dismissed a petition that sought stoppage of construction activity in its Special Economic Zone in Mundra.

S&P, on Thursday kept its `BB' corporate credit rating on Tata Motors on Credit-Watch with negative implications, pending finalisation of the long-term financing plans for funding the company's purchase of Jaguar and Land Rover business from Ford. At the same time, Standard & Poor's ratings on all Tata Motors' rated debt remain on CreditWatch with negative implications.

DLF Ltd on Thursday said it would buy back up to 2.2 crore shares at a maximum price of Rs 600 per equity share. The company said it would allocate up to Rs 1,100 crore for the purpose, and would finance the same through internal resources.

With the change in political equations in the Centre, PSU stocks came into investor's radar, hoping there might be possible divestment in these companies.

On Friday, Infosys Technologies Ltd announced a net profit of Rs 1,262 crore for the first quarter ended June 30, 2008, an increase of 22.76 per cent as compared with Rs 1,028 crore shown during the same quarter last fiscal. Surprisingly, markets gave a thumbs-down to the numbers, and the stock lost around 7 per cent to finish at Rs. 1676.

Industrial production growth plunged to 3.8 per cent in May, as compared to 10.6 per cent a year-ago, owing to poor showing by the manufacturing and electricity sectors.

Just when things were looking up for the markets this week, the spurt in inflation to 11.89 per cent and the negative outlook for industrial production played the spoilsport, pulling the Sensex down by 450 points on Friday. Little consolation though that the week ended with a cumulative, somewhat meagre loss of 14 points, hinting at a bullish spark still present.

Compiled by B.L. Sudarsan

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