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.
Bulls on the backfoot - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 14, 2006

    Bulls on the backfoot

    Bears remained in total control of the Indian stock market proceedings this week. The holiday-shortened week (on account of Id) saw the benchmark indices lose ground on the back of profit booking across most sectors, triggered by a fall in some key index heavyweights. Thus, at the end of the bear hammering, the Sensex had lost about 3% while the Nifty was lower by a little over 2%. However, similar to last week, the mid-cap and small-cap segments of the markets continued to witness heightened activity, with the BSE Mid Cap (up 0.4%) and the BSE Small Cap (1.5%) ending the week in the positive.

    Riding strong on the back of the gains witnessed last week, the Indian stock markets opened on a firm footing, with the benchmark indices creating new lifetime highs in early trades. However, while it seemed that the bull party would continue unabated, this happiness amongst investors turned out to be only short-lived, as the bears played spoilsport from noon onwards on Monday itself.

    From hereon, it was a different ballgame altogether. The tables turned on the bulls as the bears went into profit booking mode. This saw the Indian benchmark indices nose-dive into the negative territory. This trend persisted in the remaining trading sessions of the week as well, as every rise was met with a fresh bout of selling pressure. However, there was no specific development that could have led to this correction and it seemed largely in the nature of profit booking by institutions, with the Foreign Institutional Investors (FIIs) being net sellers to the tune of Rs 6.3 bn while domestic mutual funds sold equities worth Rs 8.1 bn. It must be noted that apart from the fact that lower-than-expected 3QFY06 results by market leaders Infosys and Reliance played their part in spoiling the mood on the bourses, the fact that the Sensex had gained about 23% in the last 10 weeks and valuations were at a hefty 19 times trailing 12-month earnings also resulted in market participants lightening their portfolios.

    However, one segment of the market remained in the reckoning throughout the week. This was the IPOs segment of the market, with some new listings during the week remaining absolutely unscathed (see table below) by the bearish sentiments that prevailed during the week. However, while the new listings continue to attract high investor interest, we would advise utmost caution to investors before investing in these and thoroughly check the valuations, fundamentals and management quality of these stocks.

    Some new listings during the week
    Company Allotment Price Price on Jan 13 (Rs) % Change
    Educomp Solutions 125 285 128.3%
    Bartronics 75 112 49.9%
    Celebrity Fashions 180 224 24.3%

    Now let us consider some sector/stock specific developments this week:

    • While most of the sectors/stocks witnessed profit booking this week, there were some that managed to stand out, Ranbaxy being amongst them. The stock was the biggest gainer amongst the Nifty stocks, up 4%. While the strength in the stock was more in the nature of bargain-hunting at lower levels, on the news front, it has entered into an in-licensing agreement with Ferring International, a Switzerland-based speciality biopharmaceutical company, for the latter's urology drug, 'Desmopressin'. As per the agreement, Ranbaxy will market the product in the Indian markets under the brand name 'Adiuretin'. This agreement is beneficial to Ranbaxy, as it is in line with its strategy to introduce differentiated products in the domestic markets. Other pharma stocks
      Company Price on
      Jan 6 (Rs)
      Price on
      Jan 13 (Rs)
      H/L (Rs)
      BSE-SENSEX 9,640 9,374 -2.8% 9,690 / 6,069
      S&P CNX NIFTY 2,914 2,851 -2.2% 2,927 / 1,894
      RANBAXY 370 385 4.2% 568 / 339
      DABUR 214 222 3.5% 226 / 81
      GUJ. AMBUJA 87 89 1.8% 91 / 49
      M&M 512 520 1.5% 529 / 216
      MTNL 147 149 1.4% 157 / 108

    • M&M, the largest tractor and utility vehicle player in the country, is planning to set up a completely knocked down (CKD) assembly unit in Russia and Malaysia. The entry will be through a JV with local partners, wherein M&M will hold a majority stake. Though details are not available, it appears that company will be primarily exporting 'Scorpio' and 'Bolero' to these countries. The move is a positive for M&M, as this will not only help the company diversify its geographical reach but also enable it to improve its average realisations and hence its margins. The stock ended the week with 1.5% gains. Other auto stocks

    • Foreign tourist arrivals in the country for 2005 touched 3.9 m. This is 13.2% higher as compared to last year. The ministry of tourism has targeted a figure of 4.4 m visitors in 2006. With the demand far exceeding the supply of rooms and no additional rooms being planned in the next couple of years, hotel room rates are bound to remain firm with an upward bias, which augurs well for all the players in the sector. On the bourses this week, while Indian Hotels gained 4%, Taj GVK was up 3%.

      Company Price on
      Jan 6 (Rs)
      Price on
      Jan 13 (Rs)
      H/L (Rs)
      HDFC 1,268 1,181 -6.8% 1,310 / 677
      INFOSYS 3,053 2,845 -6.8% 3,080 / 1,876
      VSNL 396 376 -5.2% 445 / 161
      HDFC BANK 769 730 -5.1% 775 / 448
      PNB 489 466 -4.7% 520 / 338

    • HDFC, the largest housing finance company (HFC) in the country, has decided to review its lending rates due to pressure on the cost of funds. The company is expected to increase its rates on the home loan portfolio in 4QFY06. HDFC has always targeted a fixed spread between its cost of funds and loans. Last year, when banks were flush with liquidity, most were willing to extend bulk loans to HDFC because of its high credit rating. However, this year, given the tightening of the market and the exposure limits reached by other banks, HDFC will have to diversify its borrowing. The move would help the HFC protect its margins. However, the stock topped the losersí list this week, down almost 7%. Other finance stocks

    Going forward, investors would continue to feel the heat, as the markets could become more volatile as more of Corporate India reveals its December quarter performance. While we believe that India Incís financial performance scorecard would decide the market movements in the near-term, we would advise investors to take a long-term approach while investing. While investment in equities was never risk-free, this is compensated for by the higher returns. The risks can surely be mitigated to a large extent by following a disciplined, staggered and fundamental investment approach, which is an optimum strategy, especially for a retail investor, for whom preservation of capital is as important as earning decent returns on the same. Happy and safe investing!



    Equitymaster requests your view! Post a comment on "Bulls on the backfoot". 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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    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.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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 18, 2017 (Close)