Tech firms’ comments seen leading to rally

Mumbai, Aug 26: Indian shares are expected to rise after Friday’s surge on Wall Street but analysts expect profit-taking could limit gains, given the underlying caution about the the tech sector.

But fund managers, taking a slightly longer-term view of the market, see an improvement in frayed investor sentiment and advise to look for further upbeat comments from technology companies which could set the ground for a rally in the sector.

Favourable comments from US tech giants Cisco and Lucent late last week could help sentiment a little. "We could be at the bottom of the curve," a domestic fund manager said.

"There is a renewed interest in stocks. In the past few days, some of the second-tier technology and other sector stocks have been rising amid good volumes." The Sensex ended last week almost unchanged, rising just 0.3 per cent to 3,305.51 points.

On Wall Street on Friday, stocks posted their biggest rally in more than six weeks. The tech-heavy Nasdaq Composite index rose 4.01 per cent on Friday driven by technology bellwether Cisco Systems which said business is stabilising. Lucent Technologies also said it expected the battered communications equipment market to rebound in 2003.

The index rose 2.7 per cent in the week. The Dow Jones industrial average rose 1.9 per cent on Friday and ended the week up 1.8 per cent.

Domestic pharmaceutical shares, which hogged the limelight last week, are expected to remain firm on prospects of higher earnings from sales of generic versions of various off-patent drugs in the United States.

In the past week, the nation’s top drugmakers Ranbaxy Laboratories and the New York Stock Exchange-listed Dr Reddy’s Laboratories have announced plans to sell generic drugs in the United States.

"We are very selective in the broad market but the pharma sector stands out and looks exciting," Jayesh Patel, head of research at LKP Securities, told Reuters. The domestic fund manager added: "Valuation parameters of these drugmakers have changed in the light of these announcements. These stocks could rise nearly 20-25 per cent from the current levels."

Analysts say a recovery in the technology sector could push money out of the consumer goods and automobile sectors causing their share prices to weaken. While companies in these two sectors have not sparkled in recent months -- data shows demand has waned -- the sectors caught attention on hopes that good monsoon rains would would fuel consumer demand and boost profits. But cement shares are expected to stay firm as construction picks up after nearly three months of slowdown due to monsoon rains, brokers say.

Cement companies hope a bumper harvest after a good monsoon would boost new construction in rural areas.

(Reuters)