Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Good(bye) 2004! - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 1, 2005

    Good(bye) 2004!

    For 2004, there could not have been a better close for Indian stock markets as they not only ended the last trading day of the year on a strong footing but also closed the final trading week of the year with near 2% gains. For Indian stock markets, year 2004 will go down in history for the numerous records it managed to create during the year. However, 2004 could have ended on a more cheerful note but for the Tsunami disaster that struck many Asian nations on December 26, 2004, claiming over 125,000 lives at last count.

    Coming back to the markets and just a few of the records it managed to bag in its kitty this year, 2004 saw the highest ever inflows of FII money into Indian equities. While the fact that a weakening US dollar definitely aided this trend, the strong fundamentals of the Indian economy and the good growth prospects for India Inc. over the next few years too played an important part in attracting the moolah. Thus, for 2004, net FII equity investment into the country was approximately Rs 352 bn, overtaking the previous high of Rs 300 bn in 2003, helping the BSE-Sensex end the year at all-time highs of over 6,600 points. Further, it was the third consecutive year of positive close for the Sensex (see table below). The year was also witness to ample amount of money flowing into the mid-cap segment of the market helping many stocks (many of them devoid of any fundamentals) post astounding returns. Key gainers / losers over the year

    Year FIIs (Rs bn) Sensex % gains/
    1999 66 64%
    2000 64 -21%
    2001 133 -18%
    2002 36 4%
    2003 300 73%
    2004 352 13%

    However, as much as the year would be remembered for the record FII inflows and the various reform measures undertaken by the government(s) to help support and accelerate India's economic growth, the surprise dethroning of the 'feel-good' NDA government in May 2004 and the consequent stock market crash would remain at the top of investors' minds for a long time to come. It must be noted here that on May 17, 2004, the Sensex crashed over 840 points (near 17%) intra-day and it was for the first time ever that trading was halted on the stock exchanges for a brief period. However, markets soon found a footing and assurances and re-assurances and even some concrete measures by the UPA government over a period of time helped revive the faith and confidence amongst investors towards the government, which worked in favour of the stock markets.

    Some key gainers over the week (NSE-50)
    Company Price on
    Dec 24 (Rs)
    Price on
    Dec 31 (Rs)
    H/L (Rs)
    BSE-Sensex 6,498 6,603 1.6% 6,617 / 4,228
    S&P CNX NIFTY 2,063 2,081 0.9% 2,088 / 1,292
    DABUR 85 94 10.1% 98 / 60
    TISCO 359 385 7.3% 397 / 155
    PNB 378 406 7.3% 411 / 212
    SBI 609 652 7.1% 690 / 390
    HINDALCO 1,335 1,423 6.6% 1,599 / 720

    As far as trading this week was concerned, after two-weeks of back-to-back gains, the indices continued to march ahead at start of trade on Monday and this was despite the Asian region having being rocked by an underwater earthquake, which consequently led to the tsunami disaster. The following two days of trade were no different as FIIs continued to increase their exposure to Indian equities. Though Thursday's trade witnessed a bout of profit booking, the indices bounced back even more strongly on Friday, ending the year at record-highs re-affirming the positive outlook of investors into 2005.

    Some key losers over the week (NSE-50)
    Company Price on
    Dec 24 (Rs)
    Price on
    Dec 31 (Rs)
    H/L (Rs)
    HCL TECH 360 344 -4.5% 407 / 234
    ONGC 858 820 -4.4% 1,000 / 510
    VSNL 242 232 -4.1% 249 / 110
    GAIL 238 231 -3.0% 312 / 101
    IND. HOTEL 551 539 -2.3% 575 / 321

    Consider some of the sector/stock specific stories during the week:

    1. Stocks related to the tourism and hospitality industry remained out of favour on the back of the natural disaster that hit many Asian countries. As per reports, Asian inbound tourist traffic has fallen by about 40% as they have opted for alternative destinations. In case of India also, tourist cancellations are being pegged at about 20%. This affected investor sentiments towards stocks related to the hospitality and tourism sectors, as with tourist inflows slowing down, it may affect the prospects of the industry in the near-term. The key losers during the week included EIH (9%), Thomas Cook (6%), Taj GVK Hotels (2%) and Indian hotels (1%).

    2. Cement stocks also closed the week in the positive. Strengthening cement prices on the back of a pick up in construction activity across the country has helped keep the stocks in favour. Going forward into 2005, with the absence of any significant capacity expansion likely to come on stream, prices are likely to sustain. Key gainers during the week

    3. Banking stocks continued to steal the limelight on the bourses as a number of themes revolve around banking stocks. The sharp rise in non-food credit, expectations of heightened activity on the consolidation front and the possibility of a hike in voting rights at par with the holdings in a bank have all collectively fuelled sentiments towards the sector. Key gainers during the week

    Going forward, as investors welcome 2005 with arms wide open and heavier pockets (!), we anticipate tougher times for investors to identify stocks where significant value/growth remains, as most of them have run up quite substantially. Further, while over the long-term, India remains on our BUY radar, the sharp run up in many sectors/stocks in 2004 makes us apprehensive of the momentum sustaining for long in 2005. However, much of this is dependant on the US and domestic interest rates as, while a substantial (substantial) rise in US interest rates could see the FII inflows reverse back to the safer US bonds, significant hike in domestic interest rates could see consumer and corporate spending suffer, consequently affecting the overall growth of the economy. However, to conclude, we continue to maintain that a staggered investment approach with a long-term investment horizon remains the best investment style at the current juncture. Happy investing!



    Equitymaster requests your view! Post a comment on "Good(bye) 2004!". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    This Company Beat the Business World's 'Three Killer Cs' (The 5 Minute Wrapup)

    Aug 16, 2017

    And what it has in common with beating the stock market too.

    5 Steps To Become Financially Independent (Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Let's Hope This Correction Continues (The 5 Minute Wrapup)

    Aug 14, 2017

    Last week's correction is making a number of Super Investor stocks look a lot more attractive...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 16, 2017 (Close)