The Hindu Business Line : Manic week for equity investors

Lehman Brothers announced that it was filing for Chapter 11 bankruptcy following failed attempts to rescue the 158-year-old firm on September 14. On the same day, Bank of America said that it had acquired Merrill Lynch for $50 billion in an all-stock transaction.

The Wall Street meltdown triggered a global sell off, at the beginning of the week. The Sensex plunged 470 points or 3.35 per cent on Monday, with rising mortgage defaults and home values plummeting in US being the key causes for the turmoil.

But after nearing the July low, both the Sensex and Nifty bounced up smartly, ending the week on a positive note by gaining 41.5 and 16.8 points respectively.

The BSE Oil and Gas, Bank and Auto indices also ended in the green. However, the realty and metal indices shed 12.6 and 7.8 per cent, as realty stocks continued to be afflicted by slowdown worries and metals by the global commodity meltdown.

The BSE Consumer durables and small- cap indices both lost 7.4 per cent. Other major losers were BSE Health Care (5.9 per cent), BSE Mid cap (5.6 per cent) and BSE IT (3.7 per cent).

52-week low

During the week quite a few blue chip companies recorded their 52-week low — to name a few Reliance Industries, Reliance Communications, Tata Steel, Hindalco, Tata Consultancy Services and Sterlite Industries. From the sector indices, BSE Metal, Realty, Small-Cap and Consumer Durables Indices recorded new 52 week lows.

For the week, mutual funds were the net buyers with a net investment of Rs 1,983 crore, whereas foreign institutional investors were on the ‘sell’ side with net outflows of Rs 4,658 crores. Inflation increased slightly to 12.14 per cent for the week ended September 6, compared with its previous rate of 12.10 per cent.

Commodities

Gold proved its mettle as a safe haven, by registering an extra-ordinary weekly gain of $107.7/ounce or 14 per cent closing at $871, in the midst of turmoil. Silver followed suit by gaining almost 16 per cent. After dipping to an intra-week low of $90.5/ounce, crude oil bounced off recent lows, sustaining above the $100 mark by finishing the week at $104.55.

Stock-specific action

Reliance Capital announced that it would invest up to Rs 2,000 crore in its insurance business over the next three to five years and also enter the banking, home loans and consumer finance businesses. It also declared a dividend of 55 per cent for fiscal 2007-2008. The stock gained 5 per cent on weekly basis with heavy volumes.

US FDA (Food and Drug Administration) has blocked about 30 generic drugs of Ranbaxy Labs, which triggered a sharp fall in the stock price. It plummeted 21 per cent last week. Unitech was another big loser with down 19 per cent, as concerns about PE investments by Lehman in the firm’s projects surfaced.

The third week of September was a memorable week, a week in which stock market history was probably rewritten!.

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