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Krishnan Thiagarajan

IT was a big week at the bourses. Obviously, the Budget for 2002-03 was slated to overshadow other developments during the week, especially in a tough year for Corporate India.

Bogged down by the industrial slowdown, the Indian industry was looking to the Budget to provide the necessary stimulus to the economy and set the stage for the resurgence of capital investments.

However, the signals emerging from the movement of the BSE Sensex proved to be contradictory. On the day of announcement of the Budget, the BSE Sensex plunged by 143.35 points (or 4 per cent) to close at 3562.31 points. It could only be construed as thumbs down for the Budget.

But, the irrational behaviour of the markets were evident on the next day. Strangely, the Sensex rallied by 116.44 (or 3 per cent) points to close the week at 3678.75, wiping out nearly all the losses of the previous day. This rally was marked by all-round buying in both the old economy and new economy counters.

Clearly, the winners and losers for the week were dictated by the industries favoured/affected by the Budget. FMCG was one of the beneficiaries of the Budget and it was aptly represented by in the price trend of the FMCG major, Hindustan Lever.

The exemptions granted to the pharma sector helped the domestic pharma stocks such as Ranbaxy and Cipla to stage a rally, post Budget. The absence of any fresh additional burden triggered a rally in the cigarette major, ITC. The additional depreciation of 15 per cent announced in the Budget enthused some trading activity in capital goods majors such as ABB, BHEL, Siemens, Cummins India and Thermax. The reduction in the excise duty granted to stimulate demand for tea appears to have sparked a modest rally in the tea major, Tata Tea.

The key sectors, which were shunned after the Budget were the commodity and software stocks. The enhancement of customs duty on non-ferrous metals such as aluminium, copper, zinc and lead led to some selling pressure in stocks such as Hindalco, National Aluminium, Sterlite Industries and Indo Gulf Corporation.

The reduction in the deduction under Section 10A/ 10B from 100 per cent to 90 per cent led to a selling stampede among software stocks on the day of the Budget. Stocks such as Infosys Technologies, Wipro and Satyam suffered losses, although most of them staged a modest recovery on Friday's trading.

After the close of the trading hours on Friday, the blockbuster deal of the year was announced - the merger of Reliance Industries and Reliance Petroleum to be considered on Sunday. This is likely to hog the limelight next week, specially as the stock swap ratio would be announced on Sunday.

INTERNATIONAL MARKETS: The international markets staged a remarkable bounce back this week. When the Dow Jones Industrial Average closed 4 per cent higher at 10368.86 points, it was probably the best weekly appreciation since late September 2001. Similarly, the Nasdaq Composite Index closed 4.5 per cent higher at 1802.74 points, its highest appreciation since November 2001.

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