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Uncertain times

Feb 9, 2008

The Indian stock market continued to be plagued with uncertainty throughout this week, with the Sensex ending in the negative in 3 out of the 5 days and 2 IPOs being withdrawn due to poor response. For the week ended February 08, 2008, the Sensex lost 4.3%, while the Nifty lost 3.7%.The week began on a positive note on the back of cues from the US bourses. Index heavyweights from the software sector registered maximum gains as the Sensex added 418 points, while the Nifty added 146 points on Monday. Tuesday closed amidst fluctuating sentiments after the indices kept wobbling around the dotted line through the day. The Sensex trudged 3 points upwards, while the Nifty gained 20 points. The broader markets languished deep in the red throughout the day on Wednesday, with the software sector bearing the brunt of selling activity. The Sensex lost 524 points, while the Nifty shed 161 points.

Thursday opened to a side-ways start on the markets but then witnessed a nosedive in the second half of the day from which the indices could not recover till the closing hours. Heavyweights from the software and power sectors led the pack of losers. The Sensex lost 613 points while the Nifty shed 189 points. Friday went down as a choppy day with the Sensex losing 400 points at the halfway mark during the day's trade but then recovering most of its losses towards the closing hours. Thus, the BSE-Sensex closed at 17,465 (down 62 points) while the NSE-Nifty closed at 5,120 (down 13 points) during the last trading day of the week.

On the institutional activity front, between 1st February and 7th February, FIIs emerged as net buyers buying equities to the tune of Rs 47 bn, while mutual funds bought equities to the tune of Rs 3 bn.

(Rs m)MFs FIIsTotal
1-Feb1,000 10,343 11,343
4-Feb8,189 38,107 46,296
5-Feb(2,975) 5,769 2,794
6-Feb(2,122) (5,282) (7,404)
7-Feb(784) (1,684) NA
Total3,308 47,253 53,029

On the sectoral indices front, the BSE BANKEX Index (down 7%) led the pack of losers.

IndexAs on Feb 01As on Feb 08% Change
BSE HEALTHCARE3,643 3,634 -0.2%
BSE PSU8,377 8,276 -1.2%
BSE SMLCAP 10,072 9,920 -1.5%
BSE MIDCAP7,762 7,633 -1.7%
BSE FMCG2,225 2,175 -2.2%
BSE IT3,934 3,843 -2.3%
BSE OIL AND GAS 11,023 10,638 -3.5%
BSE METAL 15,910 15,115 -5.0%
BSE AUTO5,005 4,741 -5.3%
BSE BANKEX 10,890 10,159 -6.7%

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

Reliance Communications has announced that its subsidiary, Reliance Infratel, proposes an IPO of 89,164,100 Equity Shares of Rs 5 each for cash at a premium to be decided through the 100% book building process. The issue will constitute 10.05% of the post-issue paid-up capital of Reliance Infratel. At least 30% of the issue shall be available for allocation on a proportionate basis to retail bidders. The company's business is to build, own and operate telecommunication towers and related assets at designated sites and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communications service providers under long-term contracts. These customers use the space on the company's telecommunication towers to install their active communication-related equipment to operate their wireless communications networks. The issue proceeds will be utilised to finance the development of passive infrastructure sites and for general corporate purposes. While RCom closed higher by 6% for the week, Bharti Airtel ended 3% lower.

Maithon Power (MPL), a 74:26 joint venture between Tata Power and Damodar Valley Corporation (DVC) has completed its financing for the 1,050 MW thermal power project, being set up in Dhanbad, Jharkhand. The Project estimated at a cost of Rs 45 bn is being funded on a debt-equity ratio of 70:30. The debt for the project is Rs 31 bn and is being financed by various banks led by SBI with an exposure to the tune of Rs 10 bn. The project will comprise of two generating units of which the first unit of 525 MW is expected to be commissioned by October 2010, which is in time to meet the 2010 Delhi Commonwealth Games requirements. The second unit will be commissioned by March 2011. The long-term coal linkage has been allotted from the nearby Bharat Coking Coal mines and water allocation is from the adjacent Maithon reservoir. The closure of financing is a positive development for the JV as the unique terms of debt financing provides it flexibility in the execution of the project as well as in controlling costs. While Tata Power closed marginally lower, Reliance Energy ended 3% lower.

Top gainers during the week (BSE A)
COMPANY Price on February 1 (Rs)Price on February 8 (Rs)% CHANGE52-WEEK H/L (Rs)
BSE SENSEX 18,243 17,465 -4.3% 21,207 / 12,316
S&P CNX NIFTY 5,3175,120 -3.7% 6,357 / 3,555
ESCORTS 88 104 17.8% 174 / 73
ROLTA INDIA 253 294 16.6% 390 / 138
MIRC ELEC. 22 25 14.8% 42 / 16
BPCL 385 437 13.7% 560 / 287
NEYVELI LIGNITE 140 156 11.3% 274 / 49
MRPL 81 89 10.5% 149 / 32

Glenmark Pharmaceuticals SA (GSA), the Swiss subsidiary of Glenmark Pharmaceuticals, has received a milestone payment of US$ 15 m from Forest Labs as per the collaborative agreement signed in September 2004. Forest is Glenmark's North American partner for Oglemilast (GRC 3886), a drug for curing asthma. This follows a favourable response from USFDA, allowing Forest to initiate an additional Phase II study in COPD (chronic obstructive pulmonary disease) for Oglemilast. Forest will pay other milestone payments worth US$ 190 m if the development and commercialisation of the product is successfully completed in the North American market. Additionally, after commercial launch, Glenmark will earn a royalty from Forest on net sales of the product, and, in addition, will supply all API for sale by Forest. While Glenmark Pharma closed higher by 1%, Lupin ended 7% lower.

Top losers during the week (BSE A)
COMPANY Price on February 1 (Rs)Price on February 8 (Rs)% CHANGE52-WEEK H/L (Rs)
VSNL 527 443 -15.8% 783 / 342
SAIL 226 201 -11.2% 293 / 92
MARUTI SUZUKI 905 804 -11.2% 1,252 / 700
ICICI BANK 1,198 1,067 -10.9% 1,465 / 791
KOTAK BANK 961 859 -10.6% 1,436 / 402

What is the retail investor supposed to make of the market turmoil, you ask? Warren Buffett says in a recent interview, "If you buy a farm as an investment, do you sit there and watch the Farm Channel on television all day, as they tell you corn went up a penny or something like that? You buy the farm and figure it is a good investment over a period of time. But in stocks, you have so much information thrown at you all the time. You have it in print, you have it on the tube, so you think you have to do all these things all the time or form opinions. The truth is, you don't have any business-forming opinions and you don't need to. All you have to do is sit there and ride a good asset over a long period of time." So, dear reader, we urge you to find good businesses, ensure the price is right and embrace a long-term horizon.

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