Markets at a glance

TRADING DESK

Volatility marked market activity last week, though indices posted considerable gains. The Sensex gained 411 points to close the week at 8,634.48, while the Nifty ended up 123 points at 2601.

Short covering in the derivatives segment renewed buying interest in large cap counters and firm trends in Asian markets led to the upsides in indices.

However, mid and small-cap segments witnessed volatility. The index recorded a 265 point gain on Monday, its highest single day rise since May 18, 2004.

With the Sensex gaining more than 400 points during the week, most of the index stocks closed with gains. Out of 30 stocks, there were only three stocks which ended up in the red. Reliance Industries, the stock with the second highest weightage in the index was the biggest contributor to the index gains last week.

The stock gained 6.04 per cent to close at Rs 793.50, thus adding 54.21 points to the index. The other big contributors were also stocks with high weightages. The biggest of them all, ICICI Bank (up 4.29 per cent at Rs 600.35) added 41.99 points to the index, while Infosys' (up 4.86 per cent at Rs 2517) contribution was 42.13 points.

All the sectoral indices ended the week with gains. BSE Capital Goods index was the biggest gainer, advancing 8.97 per cent for the week. The gains in the index were mostly powered by above 10 per cent gains in Larsen & Toubro and BHEL.

BSE Oil & Gas and BSE PSU posted the next best advances last week. Gains in IPCL and ONGC were the main triggers for the gains in the former, while advances in the latter were mainly the result of gains in stocks such as SBI and Gail apart from ONGC.

US markets closed higher for the week as well as the September quarter. A fall in oil prices improved sentiments at the bourses after disappointing economic reports proved a dampner.

US stocks bounced back after being in the red for two weeks on a mix of end-of-quarter portfolio reshuffling, and an easing of the anxiety about the impact of hurricanes Katrina and Rita on the economy. For the quarter, the Nasdaq jumped 4.6 percent, while Dow Jones industrials climbed nearly 2.9 percent.

The focus was mostly on penny stocks as Mr. Know All got into the action. However, that did not stop the Sensex from crossing the 8,700 mark during the week, though the week's action was mostly notable for the highly volatile trading patterns. Frangipani and desi funds continued to be buyers, which is keeping the liquidity strong in the markets.

While the smart crowd has been pointing out how the mid-cap stocks are over cooked and the valuations are stretched, desi funds are still merrily buying into them. For example Tumble Ton was a buyer at Amara Raja Batteries counter, picking up the shares at Rs 152 levels.

While it is not clear what is immediate justification for Tumble Ton's actions, some have noted that company's confidant projections of a 22-25 per cent market share in automotive and industrial battery segment by the end of FY06, makes it a stock worth watching out for.

The stock of Scandent Solutions Corporation has been on a free fall of late. From Rs 331 levels the stock has come down to Rs 204 levels, that is a drop of 62 per cent.

Foreign funds, who have been holding the stock had started selling much earlier, but now it seems they are offloading even more. Clive Lloyd Fund and HS Busy were among the sellers at the counter recently. While the former sold the shares at Rs 204 levels, HS Busy sold the shares at Rs 212.

The Big Bank's desi fund was a buyer at the India Cements counter. The fund is said to have made the purchase at Rs 99 levels. Interestingly, the fund buying happened at a time when the stock was slipping after touching 115 levels some two weeks back.

Phoenix Fund has decided to offload shares of Shree Vindhya Paper Mills. The fund is said to have sold the shares at Rs 8 levels. The stock which was in single digits till the end of August had suddenly seen a spurt since then and had risen to Rs 14.50 by the second week of September.

What to expect this week

Foreign fund inflows and the impending second quarter earnings season are likely to dictate trends this week. IT Bellwether, Infosys is scheduled to announce their quarterly numbers on 11 October 2005. The markets witnessed high volatility last week.

Valuations in several mid and small-cap counters are perceived to be stretched, which might lead to profit booking in some of these counters. Going by the recent trends, FII and mutual fund inflows are expected to continue, which should support stocks at higher levels, say analysts.