Auto sector takes a beat

S. Vaidya Nathan

THE past week has seen the markets on a downtrend with the broad market indices, such as the BL 250 and the S & P CNX 500, declining by around 4 per cent.

The narrow market indices, such as the S & P CNX Nifty and the BSE Sensitive Index, have declined to a lesser extent. This comes after 2001 got off to a good start on the back of some heavy inflows by foreign institutional investors (FIIs). The past week has seen both the new and old economy stocks take a hit. Much of the focus has been on the disturbing numbers coming for some of the key sectors of the economy.

Leading the pack has been the commercial vehicles sector. The two listed players -- Tata Engineering and Ashok Leyland -- have reported one more month of declining sales year on year. The weak trends through the months of fiscal 2000-01 also continues. TELCO has reported a 40 per cent decline in output December 2000. The numbers flowing in from both the companies show the sector in deep trouble. What compounds the woes for TELCO is the weak showing of its cars business as well. Despite starting the week on a firm note following the announcement of an alliance with Peugeot to develop a new car, the poor numbers in its existing businesses sank the TELCO stock by the end of the week. The commercial vehicles index was down by 9.8 per cent.

The Zee Telefilms stock has also been under pressure. It is down to around the Rs 240 levels. The stock has recently been under relentless pressure and has been dropped from many key mutual fund portfolios. If the trends in the performance of its programmes is anything to go by, the stock may show weak trends. A key aspect to watch would be the earnings announcement which is slated for January 25, 2001.

The technology sector has also been weak. The technology sector has seen a decline of around 8 per cent. Infosys Technologies, despite an impressive showing, closed the week with losses. Most other frontline technology stocks fared likewise with Wipro leading the way.

The plantation sector had something to cheer about. The Tata Tea stock has been sharply up. It is quite likely the removal of controls by the Government as part of its policy initiative on the sector may be viewed favourably. The possibility of further upside in this sector cannot be ruled out.

The housing finance sector has also been down in the week with some selling pressure on HDFC.

As far as the forthcoming weak is concerned, earnings announcement driven gains may be in store in some stocks. But by and large, the trend may continue to be weak. In the first two weeks of January 2001, the FII's have been big buyers. The FII purchases were at Rs 3,061.90 crore and FII sales at Rs 1,456.6 crore. The net purchases has been of the order of Rs 1,605.30 crore. Despite such strong flows from FIIs, the underlying trend has been of a rather weak nature. A similar trend may well continue for the week ahead as some of the information technology stocks could come under stress.