Amidst the uncertainty pertaining to the outcome of the parliamentary elections, the start of the week was a lacklustre one for the markets.
However, sustained buying to the tune of Rs 4,400 crore in the first four trading days by foreign funds helped the BSE Sensex post gains of 2.5 per cent to 12,173. Nifty rose 1.4 per cent to 3,672. Gains in the mid cap and small cap indices were limited. The BSE Mid-cap index increased 0.97 per cent while the Small-cap index ended flat.
Markets this week
The markets will react positively to the development that a Congress-led coalition is likely to form the next government and take the economic reforms process forward.
Apart from the news on the domestic front, global cues too will play a role. Even though the stimulus packages announced by various governments might have infused confidence, global growth numbers are yet to show any signs of a turnaround.
FII's have also turned net buyers to the tune of Rs 8,926 crore in the month of May (Rs 4,085 crore of investment in a single day). After rising for three consecutive weeks, inflation numbers slowed down to 0.48 per cent which will add to the positive sentiment.
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Poor quarterly numbers could put the Ashok Leyland scrip under pressure this week. While sales were lower by 52 per cent y-o-y to Rs 1,218 crore, net profit dropped 70.4 per cent to Rs 53.31 crore in the March quarter.
Besides, there was a substantial increase of 384 per cent in the interest cost to Rs 44.03 crore. Although, operating profit margins dropped 226.13 bps y-o-y to 9.42 per cent, analysts believe they were better than expectations.
For the full year FY09, net profit was down by 59.5 per cent. EPS dropped to Rs 1.43 per share compared with Rs 3.53 in FY08. Ashok Leyland trades at a PE of 15.38 times its FY09 EPS.