Mar 24, 2007|
Bulls fire all cylinders!
Bulls lorded over the markets in the week gone by and in the process, erased substantial deficits of the past few weeks. For the week ended March 23, 2007, both the 'BSE-Sensex' as well as 'NSE-Nifty' edged higher by 7% each.
The benchmarks closed in the positive for four days out of five. Infact, even the decline that took place on Friday was marginal, indicating the kind of optimism that gripped the markets almost throughout the week. The volatility was also considerably lower as compared to the week before. As far as the pattern for each day is concerned, while the huge gains on Monday and Thursday were marked by consistent hour after hour gains, most of the gains that took place on Wednesday occurred during the final trading hours. On the two remaining days of the week, while the indices edged marginally higher on Tuesday, they ended marginally lower on Friday. Thus, it was the other three days of the week where the maximum gains came from. Major Asian indices also mirrored the same trend and ended the week on a positive note.
As far as the institutional activity is concerned, while the domestic mutual funds turned out net sellers to the tune of Rs 201 m, Foreign Institutional Investors (FIIs) pumped in Rs 7 bn into the markets during the week.
As far as the sectoral indices are concerned, after a long while, there was not a single coat of red, in other words, all the indices ended the week in the positive. Leaving everyone far behind though was the 'Bankex' that edged higher by an impressive 13% during the week. All the three heavyweights, viz. ICICI Bank, HDFC Bank and SBI inched significantly higher and in the process also pushed the index higher. Other key banks like PNB and OBC also edged substantially higher. The 'BSE Small Cap' last week's highest grosser witnessed a turnaround in fortunes, as it was last on this week's list. It nonetheless managed to end the week with gains of 3%.
||As on March 16
||As on March 23
|BSE OIL AND GAS
Let us have a look at some key stock/sector specific development during the week:
The Wadia family of Bombay Dyeing and France-based dairy product giant Groupe Danone, equal partners in the biscuit maker Britannia Industries are planning to part ways. The move will result in their two joint ventures in India, Britannia Industries and Wadia BSN, being dismantled and will help them pursue their ambitions separately in the growing Indian food and dairy sector. As reported in a leading business daily, Danone is planning to make a move to buy the Wadias out of Wadia BSN. The joint venture was formed to foray into dairy products whenever the opportunity presented itself. For Wadia-BSN, the fair market value, according to the agreement, will be the aggregate of the price resulting from a valuation on the date of the notice commencing the sale procedure made by a partner of an international auditing firm, chosen by an agreement between Danone and the Wadias. Britannia (down 1%) ended lower for the week while peer Nestle edged higher by 3%.
Bharti Airtel Ltd, India's biggest wireless company, plans to sign up as many as 90 m users in three years and is seeking to acquire companies in the South Asian region to fend off a challenge from Vodafone Group Plc. Bharti will invest US$ 8 bn (Rs 351 bn) in marketing, relay towers and network equipment to garner 25% of the Indian market. The company has 22% of the market at present. The Newbury, England-based company, Vodafone aims to take on Bharti in the world's fastest-growing mobile-phone market in three years after buying a US$ 11.1 billion controlling stake in Hutchison Essar Ltd, India's fourth-largest provider. While Bharti needs to move faster to add more value-added services to its portfolio to retain leadership, the company's network gives it an edge over Vodafone. Vodafone will first need to catch up with Bharti's monthly subscriber additions and for that it needs to invest in infrastructure, which Bharti already has in place. The stock closed 9% higher for the week, while its peer Reliance Communication ended the week with gains of 13%.
As per a leading business daily, the country's ten largest banks have indicated to the RBI that the continued tightness in liquidity might compel them to slow down credit growth substantially in FY08. This outlook was manifested in the fact that the overnight call money rates rose to a decade's high of 75% last week, before closing at 40%. These highs follow the demand for funds to meet advance tax payments, government bond auctions and the impact of increases in the cash reserve ratio (CRR). To ease liquidity exigencies at some banks, the RBI has allowed banks with excess investment in government bonds (SLR) to borrow from it through the repo route. Although the RBI has been targeting a credit growth of 20% for FY07, the same has sustained at 29% YoY until February 2007. However, banking stocks across the board closed on a firm note with PNB (up as much as 15%) and OBC (up 16%).
MNC pharma major, Pfizer India, announced mixed results for the first quarter ended February 2007 (November ending company). For 1QCY07, while topline has grown by 6% YoY, operating margins have declined marginally, led by an increase in raw material costs. Bottomline however, grew faster (bottomline grew by 14% YoY during the quarter) than the topline due to reduction in depreciation charges and extraordinary expenses. If one were to exclude the impact of the extraordinary item, the bottomline growth has been staid at 1% YoY. While the stock ended higher by 8%, its peer GSK Pharma (down 4%) ended weak.
While the current rally would have definitely soothed some frayed nerves, it however, should not be construed as something that will continue to happen week after week. Though the long-term growth story is intact, valuations from a medium term perspective still look stretched for quite a few sectors and investors could do well to tone down their expectations a bit. It is not year after year that the indices would give returns in the region of 40% to 50%. A more realistic expectations should be somewhere in the region of 12% to 15% and that too in well managed companies with a strong track record and shareholder friendly management.
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 23, 2017
Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?
Aug 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
Aug 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
More Views on News
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.
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.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
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