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.
Pre-earnings jitters... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 9, 2005

    Pre-earnings jitters...

    At least that's what it seemed on the bourses this week, as the indices lost about 2% with most of the losses coming in the final two trading sessions of the week. While global crude oil prices continued to make headlines this week also, it has seemingly made investors all the more nervous about the sustainability of the growth currently being witnessed by India Inc.

    On the back of the strong gains witnessed in the second half of last week, the indices commenced trading on a rather cautious note. With the Sensex now well past the 6,600 levels again, investors preferred a wait-and-watch policy before making any serious commitments. For the entire trading session on Monday, the indices remained in a narrow range, without indicating any decisive trend on either side. The story was not much different on Tuesday. However, the volatility was a tad higher than the previous day with every effort by the bulls to gain some ground was being countered by selling pressure at higher levels. Further, while Wednesday was again the same for most part of the day, emergence of strong buying in the final hour of trade pushed the indices back over the 6,600 levels.

    Key gainers over the week (NSE-50)
    Company Price on
    Apr 1 (Rs)
    Price on
    Apr 8 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE-SENSEX 6,605 6,480 -1.9% 6,955 / 4,228
    S&P CNX NIFTY 2,068 2,031 -1.8% 2,183 / 1,292
    COLGATE 182 191 4.9% 215 / 102
    ZEE 138 144 4.4% 189 / 100
    ITC 1,353 1,400 3.5% 1,417 / 812
    TATA CHEM 152 155 2.4% 175 / 94
    SHIP. CORP. 152 155 2.3% 188 / 61

    However, the party was not to last for long. After the markets remained rather apprehensive for most part of Thursday, the bears finally decided to have it their way. And this was not restricted to Thursday alone as the bear party continued well into Friday's trade. The Sensex lost nearly 3% within a span of two trading sessions from its intra-day highs on Thursday. Profit booking was largely witnessed across sectors. However, it must be noted that the selling seemed to have largely emanated from the domestic non-institutional camp of investors (including retail investors), as both - the FIIsand mutual funds (MFs) - had been net buyers in the first 4 trading sessions of the week putting in Rs 5 bn and over Rs 1 bn respectively.

    Key losers over the week (NSE-50)
    Company Price on
    Apr 1 (Rs)
    Price on
    Apr 8 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    TISCO 409 381 -6.9% 447 / 155
    M&M 506 476 -5.8% 574 / 360
    TATA POWER 362 342 -5.6% 430 / 213
    INFOSYS 2,236 2,128 -4.8% 2,423 / 1,031
    MARUTI 431 412 -4.4% 600 / 300

    While there was no specific reason that could have led to investors staying on the sidelines and taking some profits off the table, it seemed largely the adoption of a cautious stance towards equities until a few India Inc. results start to flow and some clarity emerges on the broader earnings front. It must be noted that next week is slated to witness some key corporate results' announcements that include those of MphasiS BFL, Hero Honda, HDFC Bank, Infosys, ABB and Geometric Software.

    Now, considering some key sector/specific developments during the week:

    • Crude oil prices continued to grab headlines as they breached the US$ 58 per barrel mark on Monday making markets across the globe jittery. However, a quick announcement by OPEC members that they would increase oil supply by the end of this month and a surprise rise in US oil inventories led to a sharp correction in crude oil prices, which have retreated to US$ 54 per barrel levels. Nonetheless, with India and China continuing with their strong growth along with the recovery in the US, has led to concerns with respect to the possibility of higher crude oil prices sustaining, which has the potential to retard world growth. It must be noted that as per estimates, a US$ 5 per barrel rise in crude oil prices could slow India's GDP by 0.5% and also raise inflation by about 1.7%, which in turn could pressure on domestic interest rates. This is because India imports nearly 70% of its crude oil requirements.

    • The impact of all this was felt on oil marketing companies like HPCL (up 1%), BPCL (down 1%) and IOC (up 1%) in the domestic market. These stocks continued to be the victims of volatility on the bourses as news regarding a possible hike in petroleum product prices re-surfaced on Wednesday and seemingly died down on Friday. During the week, news that India's Planning Commission was of the view that domestic fuel prices should be aligned to the global crude oil prices, which are expected to remain firm going forward, provided some support to these stocks. It must be noted that hiking domestic fuel prices eases the pressure on the margins of the oil-marketing majors and hence the optimism. However, the cabinet meeting held on Friday refrained from announcing any price hike. It must be noted that though international crude oil prices have been trading at record levels, domestic fuel prices have not been raised since November 2004, thus affecting the profitability of oil-marketing majors.

    • Auto stocks continued their dismal performance on the bourses with M&M and Maruti being among the key losers amongst Nifty stocks this week. Rising crude oil prices was the key sentiment spoilers, as going forward; an imminent rise in domestic oil prices would adversely affect the volume sales of auto companies. Further, it must be noted, that the margins of auto companies would also remain under pressure considering the rise in input costs like those of steel and tyres. Consequently, some of the key auto manufacturers have already hinted at a price hike going forward.Other losers in the sector

    Going forward, while the outcome of the India Inc. financial performance scorecard would decide the market movements in the near-term, we would advise investors to take a long-term approach while investing. While investment in equities was never risk-free, this is compensated for by the higher returns. The risks can surely be mitigated to a large extent by following a disciplined, staggered and fundamental investment approach, which is an optimum strategy, especially for a retail investor, for whom, preservation of capital is as much important as earning decent returns on the same. Happy investing!

     

     

    Equitymaster requests your view! Post a comment on "Pre-earnings jitters...". 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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    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.

    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