Mar 19, 2004|
Worst among equals
After touching an all time high of 6,250, the BSE-Sensex has retreated and has lost nearly 11% in the last one month, mainly on account of a deluge of IPOs that hit the markets and took away the liquidity from the markets. Also, with elections round the corner, the investors would rather wait and decide on their investment decisions only after a certain political party assumes office. Against this backdrop, let us see which of the five Sensex companies suffered the most during the past one-month and analyse the reasons behind the same.
Media and broadcasting major, Zee Telefilms, suffered the ignominy of heading the list as it has lost nearly 26% during the last one month. The decline seems to be the result of uncertainty over the CAS (Conditional Access System). While a policy paper on CAS is expected to be submitted by TRAI soon, it is believed that the implementation of CAS will take some time in coming, thus hurting companies like Zee, which were touted as the major beneficiaries of the same. Also, with Zee programs having a thin presence on the popularity charts, investors seem to be rotating their money into stocks, which are likely to give more assured returns.
Punished by the investing fraternity for its price cuts in detergents, an act in retaliation of the price cuts announced by rival P&G, the HLL stock suffered a significant 24% decline during the last one month and occupied second spot on the list. With detergents forming 21% of the company's topline in FY03 and the growth in the segment also showing signs of stagnating, investors turned towards FMCG stocks such as Marico and ITC, which do not have interest in detergents. However, we believe that the action was a rather hasty one as you cannot easily write-off a company, which is the undisputed market leader in most categories and has a logistical distribution that is unmatched by its rivals. Therefore, the current decline might be a good opportunity for those who want to be a part of the HLL growth story from a long-term perspective.
Auto majors, Tata Motors and Bajaj Auto occupy the third and fifth spots respectively on the list. Unlike their counterparts on the list, the decline in these stocks had more to do with their stretched valuations than anything else. Riding on the back of robust auto sales (especially CVs) and excellent 3QFY04 results, Tata Motors had appreciated considerably during the last year or so and the stock price seemed to have run ahead of its growth prospects from a 1-2 year perspective. As a result, on account of profit booking and better growth opportunities elsewhere in the sector, the stock tumbled nearly 18% on the bourses in the last one month. However, with Daewoo's CV division in the kitty and plans of raising US$ 500 m (Rs 22.5 bn) to fund its growth plans (which includes one new passenger car for the domestic market), the long-term growth prospects of the company look promising.
Pharma major, Dr Reddy's is fourth on the list, having lost nearly 12% over the last one-month period. The decline was largely the result of a patent battle loss with Pfizer Inc, over launching the generic version of the latter's anti-hypertension drug, Norvasc. The stock suffered as there was a lot of expectations built into the stock and it was hoped that the drug, which had sales of close to US$ 2 bn last year would give the profitability of the company, a shot in the arm. Most industry watchers reckon that the company's strategy of filing patent challenges rather than waiting for the patent to expire is of the risky kind and thus gives rise to a lot of uncertainties, as the current decline has shown. Therefore, if the company has to do well in the future it will have to adopt a safer policy of launching copies of drugs as well as focus more on the bulk drugs business.
The markets have remained volatile over the last few months and it has impacted various stocks in different ways. For the above mentioned stocks the effect has been negative. What we are trying to indicate here is that while sentiments play a role in determining the stock price of a company, the role is only secondary to the fundamentals of the company. In all the cases mentioned above fundamentals has been the determinant of the stock price. Investors need to make sure that their investment decisions are based more on fundamentals rather than what the market 'feels' about the stock.
More Views on News
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.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
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: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407