The market, which was holding at 420 levels, dropped by 4.4 points on ASI and 13.1 points on MPI to close at 416 and 625 respectively last week. once again the market recorded a moderate turnover of Rs. 127.75 Mn. with an average of Rs. 25.5 Mn. Highest turnover recorded was on Friday with Rs. 52.35 Mn. This was mainly due to a heavy trading seen in some selected stocks such as JKH, Hayleys and LOLC. Foreign investors yesterday remained absent from the market throughout the week except on Friday where we saw a foreign transfer in JKH worth Rs. 15.6 Mn, a foreign purchase in LOLC worth Rs. 16.3 Mn and a foreign sale in Hayleys for Rs. 17.1 Mn. Net foreign outflow for the week was a marginal Rs. 3.90 Mn., while local retail investors dominated the activity seen in the market. Commercial Bank went XC on Monday and as a result the share price dropped to Rs. 76.75 and continued to appreciate thereafter to close at Rs. 80. NDB, which was holding on at Rs. 35 for quite some time dropped by Rs. 1.50 on thin trading volumes on Thursday. On the other hand, LOLC appreciated nearly Rs. 4.50 from the previous close at Rs. 30.50 giving a boost to yesterday turnover. This week too market activity was restricted to a few stocks such as Sampath, JKH, Asia Capital, DFCC, LOLC and Hayleys. Most of the companies, although having posted healthy results, did not make a big impact on the indices. Aitken Spence posted their highest ever results for the year ended March 31, 2001 with a 32% increase in profits after tax to Rs. 442 Mn. mainly due to contribution from their Maldivian operations.

The big blocks that moved for the week were Asia Capital (6,823,500 Shares), JKH (493,400 Shares), LOLC (487,900 Shares), Hayleys (229,700 Shares), Richard Peiris (131,400 Shares), Asian Hotels (137,400 Shares), DFCC (97,000 Shares) and Sampath (91,100 Shares).

Corporate earnings continued to offer a picture of growth despite the dismal economic scenario in year 2000. However, market response was not adequate enough to move the indices up. Political uncertainty, escalation of the war, high interest rates coupled with poor economic fundamentals prevent investors taking position in the market even at current price levels. With foreign investors having exited in force there is little hope of foreign investments flowing back unless the market sentiment improves. Treasury bill yields for six and twelve month bills remain unchanged for the third consecutive week to stay at 18.81% and 18.91% respectively. According to the prevailing money market condition, a drastic volatility in interest rates is very unlikely and officials further predict that the rate would revolve around the current levels for another three to four weeks. Meantime, the external trade statistics have improved, enabling the dollar exchange rate to stabilise at Rs. 90 levels giving some sort of stabilisation to both currency and money market. We continue to recommend investors to take positions in heavily under valued key blue chip companies such as NDB, DFCC, Commercial Bank, Hayleys, Dipped Products, Caltex, Nestle and Ceylon Cold Stores since those stocks have immense potential to record capital gains in any turnaround in the economy. (Chinkara Research)