Markets at a glance

It was yet another traumatic week for the markets which were rattled by weak global cues and relentless selling by

foreign institutional investors (FIIs). The bears dashed all hopes of a pre-Diwali rally, by holding sway for most part of the week, and on Friday pulled down the Sensex and Nifty by as much as 11 per cent and 12.2 per cent respectively. The Sensex lost 1,274 points or 12.77 per cent during the week to close at 8,701, while the Nifty fell 490 points or 15.94 per cent to end the week at 2,584 points.

A 100 basis points reduction in the repo rate, relaxation in ECB norms and Sebi's indirect threat to ban short selling by FIIs failed to provide support to the markets. While the Q2 corporate results so far have been muted, investors would find some solace in the declining inflation (11.07 per cent) and crude oil prices ($64). FIIs have sold shares worth Rs 14,488 crore in October 2008.

What to expect this week

The Diwali week will be a truncated one and investors would hope for divine intervention to change Dalal Street’s fortunes. How far the markets would fall, say analysts, depends on the stance adopted by FIIs over the week. Total net investments by FIIs in Indian equities to date amounts to $54.2 billion.

FIIs have already sold equities worth over $12 billion in 2008, dragging the Sensex down from its January high of 21,206 to current levels. ONGC, Tata Power and Mahindra & Mahindra are some of the heavyweights that will announce their Q2 results this week. Markets are bound to witness high volatility amidst the expiry of October derivative contracts.

 

Stock to watch
Indian Hotels
oil & natural gas corporation (ongc) Last week's close (Rs) 658.77 Prev. week's close (Rs) 776 Week's high (Rs) 831.80 Week's low (Rs) 635.50 Last week's ave. daily turnover (Rs cr) 266.16 Prev. week's ave. daily turnover (Rs cr) 294.92 Number of up/down move 3/2

ONGC could witness action on the bourses in the coming days, in anticipation of Q2 results, scheduled to be announced on October 30 (Thursday). As per the Bloomberg consensus estimates, the company is expected to report a 28 per cent year-on-year rise in standalone net profits during Q2FY09. A sharp depreciation of rupee during the quarter would help ONGC cushion the dip in revenues due to a fall in crude prices.

Also, lower crude prices result in lower gross under-recoveries, obviating additional subsidy burden for ONGC. Having a cash reserve of $5 billion and a virtually debt-free balance sheet, ONGC is planning to step up its acquisition initiatives going forward.

At the current price of Rs 659.55, the stock trades at 7.2 times its 12-month trailing earnings. The stock made a 52-week high of Rs 1,386.90 on November 2, 2007 and a low of Rs 636 on October 24, 2008.