A drab show

Krishnan Thiagarajan

IN a truncated week, plenty of action on the earnings announcement front, Reserve Bank of India's positive credit policy and a mega merger announcement between ICICI and ICICI Bank failed to enthuse the markets.

The BSE Sensex ended 0.2 per cent (or almost 6 points) higher at 3022.20 points. The stimulus provided by the RBI's credit policy reducing the benchmark bank rate from 7 to 6.5 per cent (the lowest level in the last 25 years) and cash reserve ratio from 7.5 to 5.5 per cent failed to make any significant dent in the banking stocks and any impact on the markets as a whole. Among the banking stocks, the prominent ones were State Bank of India, Corporation Bank, ICICI Bank and a few others. In addition, some of the banks such as ICICI Bank, UTI Bank and HDFC Bank also announced good earnings performance for the quarter.

Early in the week, it appeared that ICICI Bank was buoyed by the credit policy and the concept of universal banking reiterated in the policy triggered market interest in ICICI. But it was only latter in the week, it became clear that trading interest was propelled more by the merger proposal between ICICI and ICICI Bank.

In the old economy category, stocks such as Bajaj Auto attracted strong trading activity in the light of an impressive earnings performance. It joined the ranks of good performance by Hero Honda announced last week. There were a flurry of earnings announcement from companies ranging from Eicher Motors, Marico Industries, Tube Investments, SKF Bearings, ABB and others. While companies such as Larsen and Toubro clocked a disappointing performance, some like Ashok Leyland were bolstered by a strong other income component.

In the new economy stocks, most of the earnings performance from frontline companies such as HCL Technologies and NIIT turned out to be disappointing. Although Satyam as a frontline company managed to turn out a relatively better show, the tough and challenging external environment has forced them to revise their management guidance for revenues, operating margins and per share earnings downwards for 2001-02. On the trading front, most of the action was dominated by second and third rung stocks (notwithstanding the disappointing results in some cases) such as Kale Consultants, Maars Software, Polaris Software, Aftek Infosys, Rolta India, Sonata Software and a few others.

Among the other sectors, the pharma sector continued to attract heightened market interest, while media and telecom stocks hogged attention for some part of the week. Some of the key and high profile earnings announcement for the forthcoming week are Reliance Industries, VSNL, Telco, Grasim Industries, Indal, Tata Chemicals and Asian Paints.

INTERNATIONAL MARKETS: The international markets continued to remain buoyant, although that has not fully rubbed off on the Indian markets. This may also be partly on account of some of the relatively weaker earnings announcements from companies in the steel, paper or cement. Both the Dow Jones Industrial Average and Nasdaq Composite Index ended up in the positive territory. Contrary to buying interest in the second rung counters, most of the activity in the US markets were in the internet, software and hardware sectors and that was one of the reasons for the poorer show of Nasdaq relative to the Dow in the US. Some of the stocks in the old economy counters such as oil, chemical, and cyclical sectors attracted market activity.