Mar 31, 2007|
Bulls take a breather!
After a week's hiatus, bears were back in the reckoning on the bourses in the week gone by. As a consequence, for the week ended March 30, 2007, while the 'BSE-Sensex' ended lower by a tad less than 2%, losses on the 'NSE-Nifty' were a little lower at 1%.
In such a volatile environment, gains of 6% in one week are enough to flag off a warning sign and that is exactly what happened to the markets during the holiday-shortened week. As mentioned, after having seen robust gains posted by the indices during the previous week, investors opted to take some money off the table, thus leading to the fall during the holiday shortened week. The Sensex lost nearly 400 points in the first two trading days. The magnitude was higher on the second day as the heavyweights, especially from the IT sector, came in for some strong pounding on the back of steep fall in dollar against the rupee. Although the markets did close in the positive for the remaining two days, the gains were not enough to offset the losses of the initial days, thus leading to the indices ending the week with a coat of red.
As far as the institutional activity is concerned, while mutual funds remained net sellers to the tune of Rs 7 bn between 23rd and 29th March 2007, Foreign Institutional Investors (FIIs) emerged as net buyers to the tune of Rs 9.2 bn during the same period.
As far as the sectoral indices are concerned, unlike the previous week where a uniform trend was witnessed, the indices this week ended rather mixed. Leading the gainers' list though was the 'FMCG' index that gained 3% during the week. ITC and HLL, which together account for close to 80% of the index edged higher by 5% and 3% respectively during the week and helped explain why the index ended 3% higher. Another top gainer was the 'Healthcare' index, whose gains were because of 7% and 6% gains in Ranbaxy and Dr. Reddy's respectively, the stocks that together account for close to 30% of the index weightage. Among losers, 'Bankex', last week's shining armor found itself out of favour as it ended lowest on the list with a decline of 4%. Banking behemoths like HDFC Bank and ICICI Bank were among the worst performers on the Nifty and this also led to a decline in the index.
key indices over the week
||As on March 23
||As on March 30
|BSE OIL AND GAS
Let us have a look at some of the stock/sector specific key development during the week:
Banking stocks ended weak with HDFC Bank (down 5%), SBI (down 3%) and ICICI bank (down 4%) being the major losers. According to a leading business daily, ICICI bank has announced to raise US$ 5 bn in foreign markets this year through loans and bonds to fund its international business. Last year, the bank had borrowed close to US$ 5 bn and this year it expects the sum to be larger as it expects its whole business requirement to be greater. While most of the borrowing is expected to be in dollar terms, the bank is also considering a Euro denominated borrowing. Most of the money raised is expected to be used overseas itself, by way of ECBs (external commercial borrowings) by the Indian corporate sector. Last year, Indian companies spent US$ 8.5 bn on acquisitions abroad and ICICI bank had funded half of these deals in value terms.
During the December 2006 quarter, the total advances of the bank's international branches reported a growth of 60% YoY.
Top gainers during the week (BSE A)
Aventis announced mixed results for the fourth quarter and year ended December 2006. While the 14% YoY increase in revenues from the domestic market has largely driven the topline growth (up 9% YoY), revival in exports (up 25% YoY) especially in the fourth quarter has cushioned any further fall in exports for the full year. Operating margins have contracted by 270 basis points owing to a rise in raw material costs and other expenditure, the impact of which was more pronounced in the fourth quarter. Higher other income and a lower tax outgo have led to the bottomline growing at a faster pace than the topline for the full year. The stock ended the week with a decline of 3%. Domestic sector heavyweights witnessed a strong week with Dr. Reddy's (up 6%) and Ranbaxy (up 7%) leading the pack of gainers.
Top losers during the week (BSE A)
March 23 (Rs)
March 30 (Rs)
||233 / 128
||1,417 / 335
||991 / 651
||590 / 222
||682 / 383
Telecom stocks ended the week mixed with MTNL edging higher by 1% while Bharti Airtel and Reliance Communications losing 3% and 1% respectively. Reliance Communication (RCom) is planning an overseas public offer for its wholly owned subsidiary Flag Telecom. The company is to divest 10% to 15% equity with the proceeds being used to partly fund the capex planned for Flag. The company had, in December last year, announced its plans of building the world's largest next generation undersea cable network entailing an investment of about US$ 1.5 bn. The fiber optic cable network on completion will connect 60 countries and 5 bn global users. Flag is likely to be listed on the London Stock Exchange.
After rolling back the prices earlier this month to help the government check inflation, the steel companies are gearing up to increase prices of hot rolled coils by Rs 500 to Rs 1,000 per tonne effective from 1st April 2007. The industry plans to raise the prices even though the landed import prices are higher than the domestic prices by Rs 2,500 to Rs 3,000 per tonne. The price hike will put the industry in confrontation with the government. Although there is no domestic scarcity yet, this possibility might change from 1st April 2007 with an expected US$ 30 to US$ 50 a tonne increase in the international price making exports more lucrative. The industry is expecting the prices to hit an all time high this year with major user countries like Russia turning into a net importer and with China curbing exports. It should be noted however that SAIL, the public sector behemoth has refused to be a party to it. Steel stocks ended firm with SAIL (up 2%) and Tata Steel (up 3%) being the key gainers.
FY07 earnings announcement will start full throttle within a couple of weeks and this is likely to be the key to which way the markets move next. Although India Inc is expected to put up a good show, expectations are sky high and any negative surprise is likely to trigger a bigger correction than what is warranted. We however believe that this could turn out to be a potential opportunity to enter into good quality stocks with a long term view as this aberration would most likely be cyclical. Hence, once things regress to the mean, investors should stand to benefit from the potential upside.
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 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
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 17, 2017
Mr Trump is in the White House and the gods are in their heavens; what's not to like?
Aug 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
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 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
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