August glitter for gems and jewellery

Sector counters show the best returns, piloted by titan industries' 33 per cent rise

The gems, jewellery and watches sector was the best performing sector in the bourses during August. This was largely driven by the 33 per cent returns delivered by Titan Industries during the month.

Titan Industries was in the limelight mainly due to the increased volumes in its jewellery and watches divisions, increased operating margins, debt restructuring and the increased focus on its jewellery and watches divisions.

Paper and paper products were the second best performing sector during the last month, driven largely by the 29 per cent returns on the Ballarpur Industries counter. The outlook for the paper sector looks good mainly due to increase in the prices of paper, which will have a positive effect on the top line as well as bottom line of paper and paper product companies.

The automobile sector was the worst performing one posting losses of 7.49 per cent during the month, mainly due to the rising oil prices and the truckers' strike that impacted their production schedules. In fact, all the three 4-wheeler majors "" Maruti, Tata Motors and M&M "" were in the top 10 worst performers in August.

A review of the markets by India Index Services and Products (IISP), a joint venture between the National Stock Exchange of India (NSE) and rating agency Crisil, reports that rising inflation, rising interest rates and increasing global oil prices have worked to the detriment on investor sentiment. As a result, the benchmark stock market indices have wallowed in negative territory for most part of August.

However, the markets showed a marked upward movement in the last week of August, which succeeded in pulling up the key indices to levels last seen in July. IT stocks were in limelight, mainly driven by the impact of a successful debut of TCS on the bourses.

The review also reports that mid-cap indices hogged the limelight during the month. The CNX Midcap 200 continued with its up trend that started in July 2004. With two months of successive gains, the Midcap 200 index was the best performing index during the month, delivering returns of 9.82 per cent during the month.

Reflecting the shift in investor preferences from large-cap, index stocks to mid-cap stocks, the S&P CNX Nifty remained flat during the month, with its P/E still hovering around 13.64 as on August 31 compared with 13.63 at the end of July.

Foreign institutional investors continued to be aggressive during the month with net investment of Rs 2,893 crore in equities compared with the net purchases of Rs 913 crore in July 2004. However, domestic mutual funds continued to be net sellers "" albeit at a slower pace "" during August with net sales of Rs 98 crore compared with net sales of Rs 470 crore in July 2004.

The market capitalisation of the S&P CNX Nifty increased from Rs 6,98,200 crore on July 30, 2004 to Rs 6,98,400 crore on August 31, 2004, thereby registering an increase of Rs 200 crore. The even more broad-based S&P CNX 500 delivered returns of 1.91 per cent during the month.

In the near future, issues such as the proposed merger of oil PSUs, inflation numbers and the direction of interest rates are expected to be the major guiding factors for the market.

In the futures and options segment, the CNX IT Futures was the best performing index-based derivative product during the month, registering a 40.27 per cent growth during the month. The total turnover of the derivatives segment increased from Rs 1,75,300 crore in July to Rs 1,76,000 crore in August.

The turnover in the derivative segment, as a percentage of the total turnover in the cash segment, registered a 8.36 per cent growth and stood at 203 per cent in August 2004 compared with 187 per cent in July 2004.

The overall performance in the derivatives segment was subdued due to a lacklustre underlying cash segment.