Nuclear Tests, Us Posture Scare Bourses

While the nation celebrated the rise of India as a nuclear power, the stock markets reacted nervously last week anticipating a black-out from the international community.

The stock market was looking for a clear direction, in the absence of which there was chaos. While most fund managers were confident that India will be able to ward off any potential economic sanctions, there were some who believed that in the long-run India could feel the pinch of the sanctions.

Reflecting the nervousness, the 30-share BSE Sensex dipped to the weeks low of 3786 on Wednesday. It closed at 3849.80 on Friday.

The stock market was bereft of any reactions when the government announced the first of the nuclear tests on Monday. However, following world-wide condemnation on the following day and the sanctions threatened by the US government, the market went for a tail spin, shedding 77 points on Tuesday to close at 3782.76.

On Wednesday, when reports on the second set of nuclear tests reached the market, there was further panic and the Sensex dipped 162 points to close below the 3700 mark. However, there wasnt panic selling from FIIs and domestic institutions, specially the UTI, came to the rescue. The Unit Trust of India alone pumped in close to Rs 200 crore during the two days when the market was falling.

The Indian GDR markets collapsed following the news of the nuclear blasts. The Skindia GDR index, which on May 7 stood at 957.85, slid by 10.2 per cent to touch 859.33. There were only 3 gainers at the GDR markets over the past week, 29 remained unchanged and 33 lost ground. At the local markets, there were 12 gainers and 53 lost ground.

In fact the selling pressure was so strong that the Skindia index witnessed a slide of 11 per cent in the space of two trading days. The top losers were M&M (down 20 per cent from $8 to $6.40), East India Hotels (down 16.4 per cent from $12.50 to $10.45) and Indian Rayon (down 15.97 per cent from $5.95 to $5).

Analysts are, however, of the view that the GDR markets could gain lost ground in the coming sessions when the tension linked to the blasts and the possible US sanctions subsides. Some GDRs like ITC, Industrial Credit and Investment Corporation of India (ICICI), MTNL, Larsen & Toubro and BSES witnessed buying interest by the end of the week at the London markets.

The Indian GDR markets have witnessed a much sharper fall over the past four weeks (compared to the local markets), down by 13.31 per cent.

Most of the A V Birla group companies, which announced their financial results last week, witnessed sluggish trading interest at the GDR markets.

The GDRs of Hindalco and Indo-Gulf remained largely unchanged last week, while the Indian Rayon GDR fell sharply. With poor results posted by Grasim, the GDR fell nearly 29 per cent in a weeks time, analysts said.

NEW DELHI: Share prices plunged on the stock market during the week as foreign funds offloaded nervously on the news of imposition of sanctions on India as a fallout of the nuclear tests. Fears of a slowdown in the economy also encouraged the downslide, analysts said.

However, reassuring statements by the Prime Minister and members of his cabinet, boosted by resistance by France, UK and Russias on imposing any sanctions, brought back the confidence resulting in some buying at lower prices.

Indian financial institutions, however, were buyers throughout the week and tried to avoid any major erosion in stock values. The Unit Trust of India bought aggressively during the week, helping in reviving the market sentiment.

The sharp fall of the rupee to a record low of Rs 40.80 against US dollar at the forex market also had its shadow on the markets sentiment.

Earlier, the market started off on a strong footing on account of start of fresh fortnightly settlement and players indulged in building fresh positions particularly in the software computer and cement company stocks.

The weakening rupee would benefit software computer companies indulged in exports, mainly generated buying in these stocks, said Navin Singh a DSE broker.

While another stock broker felt the worst seems to be over and the market is likely to recover next week.

The Delhi Stock Exchange sensitive index after opening higher at 888.54 points retreated to 829.84 by mid-week before recovering partially to close at 850.73 points, still showing a fall of 28.39 points or more than 3 per cent.

On the fundamentals front, better than expected working results by Bajaj Auto Ltd and a few others did not have any immediate impact on the markets behaviour. (PTI)