Strong pullback!

It was a one-way ride for the markets during the final hour of trade today as both the benchmark indices closed on a strong note. Apart from buying across index heavyweights, strength in key stocks from the auto, banking, software, pharma and energy sectors aided the buoyant mood.

The BSE Sensex closed at 6,244 (up 109 points) and the Nifty closed at 1,931 (up 22 points). The rupee was trading at Rs 43.75 per US Dollar.

In what was seen as a complete reversal of trend of the past few days when the markets were falling incessantly, trading began today on a very strong note. This seemed mainly a result of bargain hunting at lower levels after the hammering the stocks have received in the past few trading sessions. While there were occasional signs of volatility as the indices hovered near yesterday's levels for some time during mid-session, the sentiment remained bullish. The benchmark indices, Sensex and Nifty, finally closed the day with gains of 2% and 1% respectively. Among Sensex stock, the key gainers included the key Tata Group companies - Tata Power (TTPW.BO, news) (5%), Tisco (5%) and Tata Motors (4%).

Despite the overall bullish sentiment, most stocks from the software sector closed today deep in the red. TCS (8%), CMC (7%) and Hexaware (5%) led the losers' list. The TCS stock continued with the hammering it received in yesterday's trades after the company had announced 'not so enthusing' numbers for the fourth quarter of FY05. For 4QFY05, while the topline has remained almost flat sequentially, the bottomline has declined by around 34%. This has been mainly on account of effect of contraction in operating margins, a negative other income component and extraordinary adjustments. For FY05, however, the performance has been decent. In fact, the company has reported a 200 basis points expansion in operating margins for the fiscal. Though sentiment on the stock looks negative currently, we believe it is just an overreaction in the short term.

Mixed interest was also seen in stocks from the energy sector where major gainers included Essar Oil (ESRO.BO, news) (5%), GAIL (4%) and ONGC (2%). On the other hand, Gujarat Gas (3%) and IOC (1%) led the losers' pack. Earlier, some business dailies had reported that oil-marketing companies have lost as much as Rs 13 bn during the first fortnight of April due to under-recovery on account of subsidized LPG and kerosene and price under-realisations on account of petrol and diesel. Of the total, IOC took a hit of Rs 6.5 bn, while HPCL and BPCL lost Rs 3 bn each. Non-revision of prices of petrol and diesel even as global crude prices touched record highs, coupled with the additional excise burden and the 50 paise cess, were the main reasons for this loss. For FY05, IOC suffered a total loss of Rs 84 bn. The loss in the stock, thus, seemed a follow up these reports.

FMCG stocks also closed a mix bag. While gainers included Colgate (4%), Nirma (3%) and HLL (3%), losses were seen in Pidilite, P&G and Bata India (BATA.BO, news) (each 1% down). Packaging major, Essel Propack, closed with over 1% gains. The company had announced its 1QCY05 results late yesterday, delivering a good 25% topline growth on its consolidated worldwide figures. Margins continue to be under pressure resulting in a bottomline growth of 9% YoY. Its Indian operations continue to face competition and the same have reported 10% topline growth and a 2% dip in profits. The company has a share of around 33% of the global laminated tube market and we believe that it is well on its way to achieve its mission of making every second laminated tube globally. The company recently acquired Telcon Packaging in the UK that has a 12% market share in the country.

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