Heavyweights pull down Indices

Rex Mathew
11 March 2005

After opening firm, the indices slipped into the red after news that foreign investors have increased their futures positions on the sell side. The sensex went close to its all time high of 6954 before retracing. Sensex closed at 6853, down 54 points and the Nifty at 2154, down 13 points. The Nifty futures discount to the spot index narrowed to 6 points.

US markets rebounded on easing crude prices. Crude declined close to 3 per cent on higher output expectations. The Dow gained close to half a percent while NASDAQ ended flat. Most Indian ADR's ended weak with Satyam, ICICI Bank, Wipro, HDFC Bank, Tata Motors and Dr. Reddy's all losing ground. MTNL continued its rally gaining more than 3 per cent and Infosys gained a per cent.

Index of Industrial Production (IIP) is up 8.4 per cent for the period April to January of the current year as compared to a growth of 6.7 per cent in the previous year. Manufacturing growth for January 2005 at 9.3 per cent over the corresponding month of last year confirms the up trend in manufacturing. Considering that this growth is on an already high 7.2 per cent reported for January 04 makes it more heartening.

Inflation for the week ended February 26 inched up marginally to 4.95 per cent from 4.83 reported for the previous week. However, this was lower than the consensus market estimate of over 5 per cent. The RBI governor indicated that growth rate for fiscal 2005 should be higher than the earlier estimate of 6.5 per cent while cautioning about pressure on price levels going forward.

SBI has reported credit growth of 20 per cent for the current year while indicating that credit demand is at its highest for the past 50 years. It may be recalled that ICICI Bank had also come out with similar statements in the recent past. The rapid growth in credit off take points to capacity creation by industry after growing on efficiency gains for some time now.

ICICI Securities has recommended to the government that unlisted public sector telecom giant BSNL should buy out the government's stake in MTNL, which is a listed company. This much anticipated merger would create a very strong telecom player with a pan-India footprint and a huge customer base. This may lead to a possible listing of BSNL on the bourses and it would be one of the most valuable companies in the Indian market. Investors should note that there will not be any open offer for MTNL under the takeover code as a government company, BSNL, is buying the stake from the government.