X

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.
Action packed week! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jan 21, 2006

    Action packed week!

    It was a week filled with pessimism and euphoria, which resulted in intense volatility on the bourses. Global stockmarket jitters, rising global crude oil prices, the Reliance (ex-merger) price discovery session and a slew of market-expectation-beating results by companies, which are amongst the leaders in their respective industries, took centre stage and kept investors on their toes right throughout the week. Thus, at the end of the tug-of-war between the bulls and the bears, it was the bulls that emerged the winners. The Indian stock markets ended the week on a buoyant note with the BSE-Sensex and the NSE-Nifty gaining 1.6% and 1.8% respectively.

    Continuing from where they had left the previous week (down about 3%), the Indian stockmarkets began on a jittery note and proceeded to trade lower throughout Monday's trading session. Though there was some attempt made on the following trading day to recover lost ground with Reliance taking centre stage (up 7%) a day prior to the special trading session on Wednesday, it turned out to be a short-lived moment as Wednesday saw a huge sell-off on the bourses until noon, before some buying emerged at lower levels. However, the damage had already been done.

    While some of the weakness in sentiments could be attributed to the fairly average results of last week, which seemingly raised concerns over the sustenance of the current Indian stock market valuations, weakness in global markets, especially the Asian indices, kept investors nervous. Further, with global crude oil prices having once gain gone past the US$ 66 per barrel mark during the week (affecting stocks like HPCL and BPCL), investors preferred to book profits.

    However, all of this changed Thursday onwards, in tandem with the global stockmarket sentiments, as investors scrambled to take advantage of the correction that was witnessed in the Indian stockmarkets over the last few trading sessions. It must be noted that the Sensex had lost about 5.5% by Wednesday afternoon before bargain hunting resumed at lower levels. This trend continued well into Thursday's trade as the Sensex hit a double ton (up 212 points) to record its biggest gain in the last 4-months. Investor optimism was aided by a slew of corporate results that were well above market expectations, seemingly putting to rest the fears of a slowdown in India Inc. earnings. The euphoric buying continued well into the final trading session, with the Sensex recovering 4% from the lows it hit on Wednesday this week. However, mid-cap stocks ended the week with relative underperformance.

    On the institutional activity front, while domestic mutual funds (MFs) continued to book profits (Rs 7.3 bn in the first 4 trading sessions of the week) taking their total to over Rs 31 bn (approx. US$ 700 m) of net sales since the beginning of December 2005, Foreign Institutional Investors (FIIs) continued to instill faith in Indian equities by investing Rs 3.7 bn this week and Rs 123 bn (US$ 2.7 bn) since December 2005.

    Top gainers over the week (NSE-50)
    Company Price on
    Jan 13 (Rs)
    Price on
    Jan 20 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE-SENSEX 9,374 9,521 1.6% 9,690 / 6,069
    S&P CNX NIFTY 2,851 2,901 1.8% 2,927 / 1,894
    ABB 1,998 2,252 12.7% 2,274 / 900
    WIPRO 460 499 8.4% 548 / 272
    BHEL 1,462 1,581 8.1% 1,599 / 630
    MARUTI 657 706 7.6% 712 / 389
    HINDALCO 149 158 6.5% 164 / 107

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

    • Nalco (up 2%), the largest alumina and second-largest aluminium producer in the country, raised aluminium prices by Rs 2,500 per tonne across all product categories with immediate effect. This was followed by a similar hike in aluminium prices by Hindalco (up 6%). It must be noted Indian players follow international price trends. The sudden spurt in prices internationally is due to demand having outpaced supply during CY05. This trend is expected to continue in the medium-term, as no major capacity expansion is on the cards. This has led to spot alumina prices also soaring back to US$ 600 per tonne in the internal markets, which is particularly positive for Nalco.

    • The largest banking entity in the country, SBI, hinted at raising lending rates for loans in the retail segment given the current liquidity crunch and lower deposit mobilisation. Given the liquidity squeeze, besides concentrating on raising deposits, banks would also have to look at raising resources by tapping other sources like securitisation of their loan assets. SBI itself is planning to venture on these lines (i.e. the mortgage-backed securitisation market) to satiate its funding needs. These initiatives will help banks counter margin pressures being faced currently. However, the stock ended lower this week, down 2%. Other banking stocks

    • Reliance dominated the stockmarket proceedings in the first half of the trading week, as it played the most important role in determining market movements. This was not surprising considering the weightage of the stock in the benchmark indices. The reason for which Reliance remained in the limelight for most part of the week was owing to the price discovery session that was carried out on Wednesday in a special trading hour dedicated to Reliance, the de-merged entity. While the price discovered during the special session was Rs 723, the stock ended the week down 3% from this new level. As far as the other Ambani group stocks were concerned this week, while IPCL ended the week lower (down 2%), Reliance Energy (up 5%), Reliance Infrastructure (up 11%) and Reliance Capital (up 3%) gained ground.

      Top losers over the week (NSE-50)
      Company Price on
      Jan 13 (Rs)
      Price on
      Jan 20 (Rs)
      %
      Change
      52-Week
      H/L (Rs)
      HPCL 330 317 -3.8% 380 / 282
      MTNL 149 144 -3.7% 157 / 108
      PNB 466 449 -3.6% 500 / 338
      ORIENTAL BANK 267 259 -2.9% 382 / 230
      SHIP. CORP. 160 157 -2.1% 173 / 136


    • The Indian telecom industry posted the strongest net addition of 4.5 m users during the month of December 2005. The subscriber base rose to 75.8 m during the month, a sequential growth of 62%. Both GSM and CDMA operators witnessed strong growth due to an increase in coverage and interesting packages like 'free lifetime incoming'. Overall telephone subscribes touched 125 m. Bharti Tele (up 2%) added 9 m subscribers in December 2005 taking its subscription base to 16 m. It has a market share of 24%. Tata Tele (up 0.2%) added only 0.5 m subscribers.

    Going forward, considering that the December 2005 quarter results have picked up steam, volatility on the bourses cannot be ruled out until the results season passes away. While, India Inc. results have as yet been rather good, the activity on the corporate results announcements front would only heighten over the next couple of weeks as fund managers, analysts and investors alike scramble through the numbers and try to read between the lines to decide upon their future course of investment action.

    However, we continue to believe that judging a company on the basis of its one-quarter performance would be limiting one's investment horizon to mere speculation, which often leads to over-reaction or 'irrational exuberance' as they call it. As far as the quarterly results are concerned, we feel that the 'trend' emerging from quarterly results should be taken as a reference for longer-term investment decisions and one or two quarters of below average performance should not make a difference if the fundamentals of the company and the sector to which it belongs to remains intact. Happy and safe investing!

     

     

    Equitymaster requests your view! Post a comment on "Action packed week!". 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.

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

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    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...

    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...

    More
    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

    S&P BSE SENSEX


    Aug 17, 2017 (Close)

    MARKET STATS