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.
Stock Markets: The second time... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 11, 2004

    Stock Markets: The second time...

    After three consecutive bearish years for the stock markets, 2003 saw a reversal of fortunes for investors. During 2003, the market capitalisation (market cap.) of the NSE-50 Index (Nifty) gained by an astounding 76%! Here we look at some sectors, which managed to outperform the overall index growth. We look at, in brief, the drivers for the same and also how could things shape up going forward.

    Industry % gains
    Steel 282%
    Engineering 190%
    Diversified 172%
    Shipping 168%
    Power 166%

    Note: Data restricted to NSE-50 stocks

    The above table lists down the top 5 gainers in terms of market capitalization in 2003. Let us look at some of the key drivers for the sectors above:

    Steel:
    The sector witnessed huge gains on the back of improved performances of steel companies, which was primarily a factor of strengthening steel prices (about 15%) and higher volume sales. The insatiable steel demand from China, owing to huge requirements for its infrastructure development needs, strengthened world steel prices. However, going forward, investors need to considerably reduce their return expectations, as according to industry sources, steel prices are unlikely to harden from hereon.

    Engineering/Power:
    The growth in the engineering sector could largely be attributed to the infrastructure drive currently underway in the country. Further, growth in the power sector has also an important role to play in the growth of the engineering sector, owing to the government's aggressive stand at encouraging the set-up of power generation capacities to meet the current power requirements. The government's intentions are also evident from launch of the Accelerated Power Development Reforms Program (APDRP) and the sops announced by the Finance Minister (FM) during the interim budget presented in January 2004. Further, with strong GDP growth likely to continue, the power sector would continue to show signs of strength going forward.

    Diversified:
    In this category, we have included two stocks i.e. Grasim, which has a presence in cement, sponge iron and Viscose Staple Fibre (VSF) and L&T, which is an engineering major with presence in the cement sector also. For Grasim, while cement has been a drag on its performance, sponge iron (used by the steel industry) and VSF (used by the textiles industry) saw a cyclical upturn during 2003, which helped the company post improved performance. In the case of L&T, while cement put pressure on the company's performance, it was the contribution from the engineering sector (for reasons discussed above), which helped the company grow during 2003. Going forward, the prospects for both engineering and cement sectors look promising, while the sponge iron and VSF segments could stabilise on the growth front.

    Shipping:
    The growth in this sector can also be largely attributed to the China factor. Freight rates, both for dry bulk and tankers, witnessed strong growth in 2003. Tanker freight rates gained strength primarily during the first quarter of 2003 when crude oil prices spurted owing to the Iraq war, as consumers tend to build up inventories due to uncertainties with respect to the duration of the war. On the other hand, the cause of the rise in dry bulk freight was owing to the demand from China, as it imported huge quantities of iron ore, coal, coke and other commodities to meet its requirements. Another important development was the passage of the tonnage tax regime, which would lead to substantial savings for shipping companies, which in turn could be ploughed back towards expansion of capacity.

    Having said that, the investors should have a cautious approach towards the companies and should make prudent investment decisions depending on the companies' management and valuations. Although, the potential for growth in the long term is immense, at present, the valuations of many companies seem to be stretched. From here on, growth will be the key driver for any further rise in stock prices and to that extent, the emphasis on risks has to be higher than earnings prospects. Besides, with elections in the offing, it is better to be safe than sorry. As somebody once said "there is always a second time in the stock market".

     

     

    Equitymaster requests your view! Post a comment on "Stock Markets: The second time...". 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.

    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.

    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.

    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.

    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.

    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 18, 2017 (Close)

    MARKET STATS