The shift in investment focus to software and pharmaceutical stocks was witnessed in the last 10 days after the market started falling from a high of 3500 points on January 11. Just before the BSE sensex scaled the 3500 level on January 11, the old-time market favourites like Reliance, SBI, Tisco, ACC and Telco were hogging the limelight. With the correction setting in, these stocks witnessed a sharp erosion in their values after peaking on January 11. At the same time, stocks in the software, pharmaceuticals and FMCG sectors have bucked the trend and recorded handsome gains. Since only a few stocks from these sectors form part of the BSE and NSE indices, their phenomenal rise does notget reflected.

This is not the first time that operators have switched sectors to hedge investments. With the stocks in software, FMCG and pharmaceuticals recording gains of around 15-25 per cent, it may not be long before operators once again shift focus to pivotals and index heavyweights.

During the period between Janury 11 and January 25, the BSE sensex has recovered to the 3300 level after dropping to 3200 points. Further, a sharp erosion of 300 points initially triggered a selling wave in pivotals like Reliance, SBI, BSES, Bajaj and ACC. These scrips have failed to bounce back and are lying well below the peaks scaled on January 11. Reliance, after peaking at Rs 150, dropped to 135. SBI has lost Rs 35 to Rs 162 from the peak of Rs 198 on January 11, but has now recovered marginally to Rs 170. Bajaj Auto lost Rs 85 to Rs 478 from its January 11 peak of Rs 563.

However, during the same period, software, pharmaceuticals and FMCG stocks have been on the rise and outperformed the sensex by a hugemargin. Among software, Infosys has zoomed from Rs 3,230 on January 11 to a high of Rs 5,000 before settling at around Rs 4700. During the same period, Satyam Computers spurted from Rs 811 to Rs 941, NIIT from Rs 1802 to Rs 2185 and Pentafour by Rs 200 to Rs 939.

The recent spurt at software counters was triggered by excellent quarterly performance by the frontline stocks. This performance in the past few days has forced marketmen to take a fresh look at software counters and as a result, these stocks have again emerged on the buy list of institutions and big operators. Excellent growth in earnings brought down the price earning ratios drastically, thereby making these scrips attractive.

Expectations of good results is also driving the second rung software companies. Scrips like SRG Infotech, Cauvery Software and European Software have risen substantially in the past few sessions. SRG Infotech, after an impressive first quarter, is expected to announce a net profit of around Rs 3 crore on a turnover ofaround Rs 25 crore for the first half ending January 1999. The scrip has already zoomed from Rs 3-4 level to Rs 12.

Cauvery Software, too has crossed the Rs 10 level on the news of the company making an equity placement on a preferential basis to NRIs/OCBs and other corporate bodies other than promoters.

In the pharmaceutical and FMCG sectors, there in no dearth of market outperformers during the period between January 11 and January 25. During the period, Cadburys has zoomed by Rs 60 to Rs 560, E Merck by Rs 50 to Rs 470, Novartis by Rs 80 to Rs 870 and Rhone Poulenc by Rs 150 to Rs 1,050. Smithkline Pharmaceuticals during the period gained Rs 45 to Rs 520 and Smithkline Consumer rose from Rs 560 to Rs 620.