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FE Investor Bureau
New Delhi, Nov 27: The selloff triggered by the political uncertainty has yet again taken its toll on the Sensex which lost close to 220 points in the past six trading days to 2783 points on Friday. After a brief rally of 235 points, from 2764 points to 3009 points in early November, the Sensex is once again heading towards the recent low of 2764 points achieved on October 20 and is not far away from the two-year low of 2740 achieved in December 1996.
Although the Sensex is within the striking distance of its October low of 2764 points, scrips of as many as 50 companies have already pierced the lows achieved then and are trading at a much lower level now. Prominent among them are Sterlite, Pentafour Software, Dr Reddys Laboratories, Digital Equipment, Philips, Corporation Bank, Hindustan Lever, Ponds and Bajaj Auto.At the same time, scrips like Raymonds, Cropmton Greaves, Rhone Poulenc, Glaxo, Telco, Bombay Dyeing, Tisco, LML, E Merck, Videocon International, Tata Tea and Pfizer are trading at over 10 percent higher than their October-lows.
Out of the 150 scrips in the BSE's group A, as many as 143 scrips have registered a drop in their values and scrips of only six companies have shown appreciation in the past six trading sessions. Out of these seven stocks, four are multinational belonging to pharmaceutical and FMCG sector. Positive announcements on the EMR front for the multinational pharmaceutical companies helped them stay afloat and register marginal to large gains in the past few sessions. Moving against the wave, Pfizer and Rhone Poulenc have been among the top gainers in the past six trading sessions and have reported gains of around 3 per cent.
After a substantial drop in their values to attractive levels, the software stocks have failed to generate any response from the market. The worst hit have been the pivotals and index heavyweights, who have lost as high as 22 per cent in the past six trading days. Among the index heavyweights, Telco has lost over 21 per cent from Rs 146 to Rs 115. GrasimAnd ICICI have lost more than 16 per cent in the past six trading days.
At the same time, the pharmaceutical and FMCG sectors have yet again escaped the bear onslaught and most of the BSE group A stocks in these sectors have either shown a growth during the same period or have shown only a marginal fall.
Apart from the political uncertainty, absence of FIIs from the market and downgrading of a couple of Indian banks and institutions by the international ratings agency, S & P, other factors pertaining to the particular company have also been responsible for the slide in the past few days. Sterlite for instance has been badly hit after the company reported a fire at its plant. Buyers seem to have abandoned the counter after the High Court ordered closure of Sterlite's copper smelter plant at Tuticorn on Monday. The company also faces the threat of cancellation of its plant's licence. Sterlite has lost more than Rs 36 in the past six trading sessions from Rs 160 to Rs 124 on Friday.
Similarly, auto stockslike Telco, Ashok Leyland and Mahindra & Mahindra, who initially zoomed on the news of increased take off have dropped back to their October lows. As per the latest figure released for the period April-September 1998, there has been no or little recovery on the automobile front. Luxury car makers General Motors, Mahindra Ford and Daewoo Motors suffered major drops. Except for the two wheeler segment, all other categories continued their poor run in the period with Heavy Commercial Vehicle (HCV) makers alone recording a fall of 36.47 per cent in sales during April-October 1998 as the Indian automobiles industry continued to be in the throes of a prolonged recession.
With the foreign institutional investors developing a cold feet towards the Indian stocks, the bulls have also preferred to stay away from the market. The FII inflows have turned negative and the domestic institutions, too, have been selective buyers in the past few weeks, thereby providing little assistance in stopping the drop in prices. A waitand watch policy by FIIs has further narrowed down any chances of any major revival in the short term.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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