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Indian stocks catch Nasdaq cold, stage recovery

BOMBAY: Indian stockmarkets fell more than five percent in early deals on Wednesday, spooked by the US Nasdaq exchange, but recouped a large chunk by early afternoon.

Traders said the bulls were down but not out after Tuesday's 5.5 percent plunge on the technology-laced US market abruptly halted the Indian markets' five day climb to record highs.

By 2.30 p.m. the Bombay top 30 index was down 3.3 percent at 5,312.6, but well off lows of 5,184.5.

On Tuesday the market hit an all-time high of 5,533.98 and dealers said buyers were due a breather after it put on 10 percent in this week's first two days alone.

Buying had been led by a splurge on infotech stocks after the world seemed to have entered 2000 unhurt by the Y2K computer bug.

The broader 50-share National Stock Exchange index was down 1.3 percent or 20.5 points at 1,618.2.

"The market had risen too fast in the last two days. The correction was expected," said Sunil Kothari, director at Nagindas Kothari Share & Stock Brokers.

The speed of the rise prompted market regulator Securities and Exchange Board of India to tell bourses to impose heavier trading margins to safeguard against volatility.

Outstanding positions, a measure of speculation, which hit a record high of 38.41 billion rupees on Tuesday, also forced unwinding of long positions, traders said.

But the performance of the two Indian American Depositary Receipts issues amid the bloodbath on Nasdaq helped underlying confidence in the Indian market.

Satyam Infoway closed $22 up at $222.Infosys Technologies ended up $2-at 372, off a high of $402.

Information technology stocks were the worst hit. Infosys, which makes up almost one-fifth of the benchmark Bombay index, was down 1,352.80 rupees at a low of 15,557.40.

Sectors like telecoms and entertainment escaped unhurt.

CYCLICALS BACK IN FAVOUR: Analysts forecast a strong base for the Bombay index above the key 5,100 mark and a shift in buying interest to the old favourite cyclical stocks.

"There are attractive values in FMCG (fast moving consumer goods) and I see an upside in some cyclicals like aluminium. Some cement stocks are also undervalued," said K. Ramachandran, head of research at Birla Sun Life Securities.

Reliance Industries, Tata Iron and Steel Co., Mahanagar Telephone Nigam Ltd and other index heavyweights, earlier neglected in favour of the technology and telecoms sectors, were at the front of Wednesday's recovery.

New Year allocations by foreign funds which brought a net $1.5 billion into Indian markets in 1999 will be tracked as will companies due to list abroad soon, notably Gujarat Ambuja Cements and Silverline Technologies.

Firms will begin reporting third quarter (Sept-Dec) earnings next week.

A Reuters poll of 13 brokerages and securities houses released on Wednesday forecast an average 15.4 percent rise in net profit for 29 of the 30 firms in the Bombay index in the fiscal year to March 2000. Net sales were forecast to rise on average 9.7 percent for 26 firms.-Reuters