Downtrend persists in the market

Rex Mathew
08 April 2005

After exhibiting some confidence last week, the market seems to have developed reservations about corporate results due from next week onwards. The indices opened weak and declined over a percent each in morning trades. After showing some signs of recovery towards mid-session, they cracked again under selling pressure and closed near the lows of the day. Sensex closed at 6480, down 66 points and the Nifty at 2031, down 22 points.

Among index stocks ITC, Bajaj Auto and Bharti Tele were the biggest percentage gainers while Zee Tele, HDFC Bank and Infosys were the major losers.

Even though oil prices have declined and world markets have recovered, domestic market continues to be apprehensive about the future outlook. Though the results for the Jan-March quarter is not expected to hold any negative surprises, investors are concerned about the possibility of weak future earnings guidance from companies. This is especially so in the case of IT companies, whose profitability is expected to be adversely affected by the fringe benefit tax. To make matters worse, the ADR of Infosys saw a large sell off on NASDAQ yesterday even as other tech stocks gained ground.

NYMEX crude futures for May delivery crashed almost 3 per cent to around $54 to a barrel yesterday. The decline came after reports of higher than expected inventory of petroleum products in the US, which are at their highest levels in almost three years. In early European trades today, it has slipped below the $54-mark.

Yesterday, US markets continued their recovery as NASDAQ gained close to a per cent and the Dow more than half a per cent. Indian ADR's had a bad day even in an advancing market as the tech stocks met with considerable selling pressure. Infosys lost over 4 per cent while Wirpo lost over 2 per cent. Satyam, ICICI Bank and MTNL also declined. Tata Motors and HDFC Bank managed to close with gains.

Exports from India recorded a 24 per cent increase to touch $80 billion for the year ended March 2005. As per the rough estimates released by the ministry of commerce, imports at $105 billion were 34 per cent higher than the previous year. The strong export performance even as the Rupee appreciated indicates a structural shift in our export basket to more value added goods which are less price sensitive.