Markets in firm terrain

S. Vaidya Nathan

In the past week, the markets have built on the gains of close to 5 per cent made in the preceding week. But the focus appears to be shifting out of the pivotal stocks.

In the past week, the broad market indices, such as the BL 250 and the S & P CNX 500, have posted gains of around 4.5 per cent. But the narrow benchmark indices, such as the S & P CNX Nifty and the BSE Sensitive Index, have posted gains that are two percentage points lower. This suggest much of the action has been in other stocks and the firm trends in Wipro may have also helped the broad market indices.

The private sector banks have continued to consolidate on the gains. ICICI Bank has been in the forefront with HDFC Bank also showing signs of leaving behind a phase of declining stock price.

The proposed merger of ICICI Bank and Bank of Madura may lead to firm trends in this sector. As was the case when the HDFC Bank and Times Bank merger was announced, the stocks in this sector may show gains across the board. This may be linked to speculation about the next candidate on the takeover list. Since all private sector banks except ICICI Bank and HDFC Bank could be potential targets, the short term may see a firming up of valuation in this sector' stocks.

The stocks in the cement industry continue to show firm trends. Most stocks have posted notable gains with the exception of Gujarat Ambuja Cements which has tended to consolidate at around the Rs 165 level. Stocks such as ACC and Madras Cements have been amongst the big gainers in the last one month and the past week was also no different with both stocks exhibiting firm trends. The trends are despite the fact that cement despatches were up only marginally by around 1.31 per cent in November 1999.

The commercial vehicles sector has also seen some buying interest with the relevant sectoral index showing gains of around 13.5 per cent.

Select engineering sector stocks have been having a good time. This may be linked to value-buying and perhaps some expectation of improvement in underlying demand. The prominent stock in this category has been BHEL which appears to have attracted renewed institutional interest. The stock has found consistent buying from the levels of Rs.100 to which it has receded.

The other sectors where there have been some significant gains are steel, fertilizers, tyres, cars & tractors and agrochemicals. The stocks of technology companies have also been firm and recorded gains of 9.2 per cent in December so far. The two telecom majors - VSNL and MTNL have been in the forefront.

Overall, the gains of the past two weeks suggest that the market may be consolidating at higher levels. But the trends in FII flows so far in December have not been strong. Though they have indulged in heavy trading, net inflows have been just $ 9 million. In this backdrop, it may require a bout of positive news and/or sharp rise in inflows to provide impetus to stock prices.