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.
Operators rule… - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 22, 2003

    Operators rule…

    With Mr. Hans Blix, the UN chief weapons inspector, giving almost a clean chit to Iraq and therefore, delaying a possible conflict in the Gulf, the Sensex (up 2.6% for the week) and the Nifty (2.9%) bounced back. However, the list of top gainers that includes stocks like Pentamedia, Silverline and DSQ Software indicates that it was the week of speculators. With fears of a war lingering in the background, investor community is likely to have adopted a wait and watch policy.

    Top five gainers BSE 'A' Group
    COMPANY Price on
    Feb 14, 2003 (Rs)
    Price on
    Feb 21, 2003 (Rs)
    % Change 52-Week H/L (Rs)
    BSE Sensex 3,223 3,307 2.6% 3,314 / 2,828
    S&P CNX Nifty 1,036 1,066 2.9% 1,069 / 920
    Pentamedia 11 14 28.5% 14 / 11
    EIH 9 12 27.0% 12 / 7
    Bank Of Baroda 68 83 21.3% 85 / 44
    DSQ Software 11 13 17.0% 13 / 10
    Silverline Technologies 11 13 16.2% 13 / 11

    The market opened significantly higher on Monday. This was on the back of buying in technology stocks, a knee jerk reaction to the positive events during the weekend that delayed the impending US-Iraq war. The technology stocks, which witnessed selling pressure in the previous week on fears of the conflict hurting business, were back in favour. However, it was the momentum stocks that were in the limelight. DSQ Software, GTL, Sonata, Trigyn, Pentasoft, Silverline and HFCL gained significantly. Silverline and Pentasoft crossed the 20% mark. Since fundamentals, per se, have not changed significantly for these companies in the recent past, the sharp spurt could be short-term in nature. It is wise to exercise caution given the past track record of the aforesaid companies.

    Top five losers BSE 'A' Group
    COMPANY Price on
    Feb 14, 2003 (Rs)
    Price on
    Feb 21, 2003 (Rs)
    % CHANGE 52-Week H/L (Rs)
    IND.Resort 46 43 -6.5% 43 / 35
    HINDALCO 596 573 -4.0% 579 / 469
    Essel Propack Ltd. 145 140 -3.7% 142 / 139
    DR.Reddy's 902 873 -3.3% 883 / 675
    Chennai Petro 29 28 -3.3% 29 / 22
    Philips 99 96 -3.0% 96 / 83

    The prospects for technology majors like Infosys continue to be extremely strong barring short-term concerns. Investors could consider investing in the company from a three to five year perspective. However, in case of a possible conflict, the stock is likely to witness selling pressure. Another stock that jumped on Monday was ACC. The stock moved up swiftly (up 7% for the day). The rise was due to expectations of an open offer from Gujarat Ambuja, which holds 14.4% stake in the company. Gujarat Ambuja bought this stake from the Tata's for Rs 370 per share.

    On Tuesday, Hero Honda, the second highest gainer over the week amongst the BSE-30 stocks, continued to rise north after plummeting to Rs 205 levels in the previous week. This nervousness was on the back of a concerns regarding sales slowing down and rising inventory levels. However, the company posted a sharp 22% rise in motorcycle sales for January 2003 and some of the fears were allayed. Hero Honda is expected to launch a 100cc entry-level bike and a 200 cc motorcycle during the course of this calendar year to keep volume growth ticking. Though we are positive on the volumes front, price realisation would continue to remain under pressure.

    Wednesday too was a good day for the bourses. While stocks like Hero Honda and HLL continued to gain, the banking stocks were back in favour. This time the buying interest was on the back of the news that Government is considering raising the FII limit (foreign institutional investor) limit in public sector banks to 49%. Consequently, PSU banks gained significantly. SBI closed the week with gains of 4%. However, star performers were Bank of Baroda (21%), Andhra Bank (19%), Union Bank (16%), Punjab National Bank (15%), Canara Bank (14%) and Oriental Bank (14%).

    We would urge retail investors not to get carried away by the news flow and properly research before making an investment into these stocks. Many of these banks recently debuted on the bourses, which is too short a time to establish management credibility. For retail investors it would be safer to run with stocks that have a proven track record when it comes to management credibility. Also, investors should keep an eye for asset quality of the banks (how much of the loans given out have gone bad and have been provided for). Another important number to check before making your investment decision is the valuation at which the bank is trading. For example, Oriental Bank at Rs 60 is trading at a Price to Adjusted Book Value (P/ABV) of 0.7x. Generally, a valuation of P/ABV of more than 1x is considered fair. Also, most of the PSU banks are in a restructuring mode, implementing technology and re-aligning work force for greater productivity. How has the stock you are considering performed on this front?

    On Thursday and Friday, the bourses took a breather and profit taking set in. The losers list included stocks that had run up in the previous trading sessions. On Thursday there was another piece of good news for the banking sector. The RBI was considering further concessions to banks, which may now allow them to transfer sticky assets to an asset reconstruction company on better terms. Earlier the central bank had stipulated that the sticky assets transferable should not exceed 40% of the quantum net worth of the bank. The RBI has however, now stated that this allowance may be on a case-by-case basis.

    Another stock that steadily moved up during the week was HLL, our recommendation for the week (Quantum View). The stock gained 5% during the week’s trading. While topline growth continues to be a concern with the stock, we believe that the company’s restructuring exercise and new initiatives should result in strong performance in the long term. However, please keep in mind that our recommendations are from a long to medium term perspective. Other key gainers for the week were engineering stocks that gained on expectations of the electricity bill being introduced in the parliament and thus, accelerating power sector reforms.

    As the budget draws closer, the trading on the bourses will increasingly become news based. During the week, the employee of a leading business daily was arrested for allegedly trying to extort money from a broker. This shows how dangerous news based trading can be. Apparently, the person arrested had asked the broker to pay up for not printing a story of the broker's wrong doings. It is not very difficult to imagine that when news comes out, there is a good possibility that it can be the other way around i.e. some news is purposely printed for some favours granted. Therefore, we would urge retail investors to make their investments based on fundamentals and not on 'hot' news. Understand the management, the company's business, its financials, future prospects and valuations. Only then make your investment decision.

     

     

    Equitymaster requests your view! Post a comment on "Operators rule…". 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 Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    Think Twice Before You Keep Money In A Savings Bank Account (Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    A Darkness Is Spreading Across the US (Vivek Kaul's Diary)

    Aug 22, 2017

    Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    More Views on News

    Most Popular

    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.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    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?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    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 22, 2017 (Close)

    MARKET STATS