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Record highs... - Views on News from Equitymaster
 
 
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  • Jan 5, 2008

    Record highs...

    The BSE-Sensex stayed firmly put beyond the 20K levels during the week as the Indian stock market achieved record highs. Four out of the five sessions during the week ended in the green. Thus, for the week ended January 04, 2008, the Sensex gained 2.4%, while the NSE-Nifty gained 3.2%.

    The week began on a cheerful note, with the Sensex gaining 80 points and the Nifty appreciating 59 points on Monday. Tuesday too ended on a positive note as power, energy and select auto stocks witnessed investors' interest, while telecom and pharma stocks reeled under selling pressure. The Sensex gained 94 points while the Nifty plodded a mere 6 points upwards. At the end of a volatile day on Wednesday, the BSE Sensex recovered 400 points from the day's low and hit new highs as the markets made a smart recovery in the final hour of the trade. The Sensex gained 165 points, while the Nifty climbed 35 points. After trading in the red for most part of the day, the indices failed to make any recovery on Thursday. Power stocks aided the indices, while software and select auto stocks ended in the red. The Sensex slumped 120 points, while the Nifty stumbled by 1 point. The markets made a thumping comeback on Friday as banking and engineering stocks aided the indices, while software and auto stocks ended in the red. Thus the BSE Sensex closed at 20,687 (up 342 points) while the NSE Nifty closed at 6,274 (up 96 points).

    On the institutional activity front, between 28th December and 3rd January, while FIIs emerged as net buyers to the tune of Rs 26 bn, mutual funds bought equities worth Rs 10 bn.

    (Rs m) MFs FIIs Total
    28-Dec 343 11,409 11,752
    31-Dec NA 7,979 NA
    1-Jan 1,835 1,423 3,258
    2-Jan 2,952 -2,445 507
    3-Jan 4,900 7,251 12,151
    Total 10,030 25,617 27,668

    On the sectoral indices front, BSE PSU Index (up 8%) was the highest gainer, while the BSE IT Index was the only loser (down 5%).

    Index As on December 28 As on Jan 04 % Change
    BSE PSU 10,245 11,093 8.3%
    BSE SMALLCAP 12,901 13,884 7.6%
    BSE FMCG 2,281 2,424 6.3%
    BSE MIDCAP 9,575 10,113 5.6%
    BSE OIL AND GAS 13,202 13,917 5.4%
    BSE BANKEX 11,386 11,905 4.6%
    BSE METAL 19,948 20,298 1.7%
    BSE AUTO 5,595 5,688 1.7%
    BSE HEALTHCARE 4,339 4,394 1.3%
    BSE IT 4,552 4,319 -5.1%

    Now let us have a look at some of the key stock/sector specific developments during the week.

    As per a leading business daily, ITC is setting up a 25,000 tonne per annum capacity facility at a cost Rs 350 m at its Bollaram unit in Hyderabad for production of elemental chlorine-free (ECF) paperboard to be used for manufacture of paper cups. The paperboard produced at the new facility will be supplied to small and medium enterprises (SMEs) for manufacture of ECF Spectra cups and will be marketed by ITC. ITC has decided to partner SMEs to popularise the usage of paper cups, which has been growing rapidly in the country over the last few years. By partnering with SMEs, ITC aims to enhance the competitiveness of the sector through its complementary R&D-based product development and marketing strengths. ITC (up 7%) led the pack of gainers from the FMCG pack for the week, while its peer Nestle remained flat.

    As per a leading business daily, NTPC is planning to bid for 7 thermal power projects with a total capacity of over 10,000 MW, entailing equity investment of Rs 16 to Rs 18 bn for each project. These coal-based power plants, requiring a total investment of Rs 400 bn, will be built in Uttar Pradesh, Madhya Pradesh, Maharashtra and Karnataka. The respective state governments will float special purpose vehicles (SPV) for the projects. The remaining amount will be raised through loans. Since the company's board of directors is not authorised to approve investments above Rs 10 bn in a SPV, it has approached the power ministry for an exemption so that it could bid for these projects. The move would help the company increase its capacity to meet the growing demand of power. Power stocks closed firm with NTPC (up 13%) and Tata Power (up 17%) featuring among the key gainers.

    Top gainers during the week (BSE A)
    Company Price on
    December 28 (Rs)
    Price on
    January 04 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE SENSEX 20,207 20,687 2.4% 20,763 / 12,316
    S&P CNX NIFTY 6,080 6,274 3.2% 6,300 / 3,555
    GUJ.IND.POW 134 178 32.7% 185 / 54
    PUNJAB TRACTORS 272 352 29.2% 383 / 183
    CANARA BANK 311 400 28.4% 421 / 174
    EIH LTD. 184 235 27.8% 239 / 88
    HINDUJA TMT 702 844 20.2% 890 / 332

    PTC has raised Rs 1.6 bn by diluting 40% stake in PTC Financial Services (PFS) to Goldman Sachs and Macquarie India Holdings. PFS is a non-banking finance corporation, which has been set up to undertake investments across the Indian energy value chain. As part of the agreement, the two financial investors acquired 20% stake each at Rs 16 per share, which is 60% premium to the face value of the shares. PTC bought in funds cumulating to around Rs 1.5 bn for its 60% equity holding in the subsidiary at Rs 10 per share. The firm has already picked 26% stake in Indian Energy Exchange, the country's first power exchange. PFS is expected to invest in greenfield and brownfield power generation assets, power transmission and distribution assets. PTC closed 20% higher, while its peer Reliance Energy gained 17%.

    Top losers during the week (BSE A)
    Company Price on
    December 28 (Rs)
    Price on
    January 04 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    SUN PHARMA 1,207 1,108 -8.2% 1,265 / 790
    TCS 1,080 1,005 -6.9% 1,399 / 935
    WIPRO 530 497 -6.2% 690 / 425
    SATYAM 450 422 -6.1% 525 / 401
    INFOSYS 1,796 1,695 -5.6% 2,439 / 1,511

    In every asset class we see, prices seem to be going one way- upwards. Way upward. For prospective investors this is time to go against the grain and question the fundamentals. As Warren Buffett points out in his 1978 letter to shareholders, "We get excited enough to commit ... to equities only when we find (1) businesses we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) priced very attractively. We usually can identify a small number of potential investments meeting requirements (1), (2) and (3), but (4) often prevents action... In 1971, pension fund managers invested a record 122% of net funds available in equities - at full prices they couldn’t buy enough of them. In 1974, after the bottom had fallen out, they committed a then record low of 21% to stocks." We ignore prices at our own peril, dear reader.

     

     

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