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Small week, small gains! - Views on News from Equitymaster
 
 
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  • May 5, 2007

    Small week, small gains!

    Marginal gains were in the offing in the holiday-shortened week on the bourses. For the week ended May 4, 2007, while the benchmark BSE-Sensex edged higher by 0.2%, NSE-Nifty, the other benchmark, gained a little higher 0.8%.

    A day of gain was sandwiched between two negative closing days during the holiday-shortened week (markets were close on Tuesday and Wednesday) on the bourses. However, the magnitude of gains on the positive ending day was good enough to enable the benchmark indices to edge higher for the week. With results season in full bloom, it were the performance reports that largely dictated which way the markets moved. While ICICI Bank was the chief wrecker on Monday, falling by as much as 7%, due largely to a lower than expected FY07 numbers, gains in Ranbaxy and Reliance propped up the indices on Thursday. Fall in inflation failed to cheer the markets on Friday as selling in heavyweights like Reliance and Bharti Airtel led to yet another fall in the index levels.

    As far as the institutional activity is concerned, while MFs turned out to be net buyers to the tune of Rs 3.3 bn, Foreign Institutional Investors (FIIs) sold equities worth Rs 4.4 bn during the holiday shortened week.

    (Rs m) MFs FIIs Total
    27-Apr (387) (1,948) (2,335)
    30-Apr 713 (3,046) (2,333)
    3-May 2,980 562 3,542
    Total 3,306 (4,432) (1,126)

    On the sectoral indices front, barring FMCG and bankex, all the other indices managed to close in the positive for the week. Top two positions were acquired by the metal and IT indices as they edged higher by 3% each. With constituents like Sterlite and Hindustan Zinc reporting robust gains, the metal index emerged as the top gainer. On the other hand, the bankex suffered a decline of 3% mainly on account of a more than 8% drop in ICICI Bank's share price over the week.

    Index As on April 27 As on May 4 % Change
    BSE METAL 9,726 9,997 2.8%
    BSE IT 4,954 5,082 2.6%
    BSE AUTO 4,945 5,064 2.4%
    BSE OIL AND GAS 7,078 7,245 2.4%
    BSE MIDCAP 5,734 5,863 2.3%
    BSE HEALTHCARE 3,696 3,745 1.3%
    BSE SMLCAP 6,941 7,032 1.3%
    BSE PSU 6,420 6,483 1.0%
    BSE FMCG 1,821 1,812 -0.5%
    BSE BANKEX 7,087 6,874 -3.0%

    Let us have a look at some stock/sector specific development during the week:

    The stock of ICICI Bank ended 8.5% lower for the week, biggest drop among all the Nifty stocks. This was on the back of the subdued results reported by the bank for the fourth quarter and fiscal ended March 2007 last Saturday. Despite continued robust in incremental advances and deposit accretion coupled with buoyancy in fee income, the higher asset slippage has dented the bank's bottomline. Decline in net interest margins (NIMs) and higher provisions have impacted the bottomline growth, which has underperformed growth in topline during FY07. Strong numbers from the rural and international fronts have, however, aided the overall performance during the said periods. Its peer HDFC Bank also edged lower by 1% for the week.

    Top gainers during the week (BSE A)
    Company Price on
    April 27 (Rs)
    Price on
    May 4 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE SENSEX 13,909 13,934 0.2% 14,724 / 8,799
    S&P CNX NIFTY 4,084 4,117 0.8% 4,245 / 2,596
    GUJARAT MINERAL DEV. 533 653 22.6% 709 / 237
    COLGATE 341 396 16.4% 459 / 275
    HINDUSTAN ZINC 652 739 13.5% 1,083 / 415
    CASTROL 256 288 12.6% 291 / 155
    DREDGING CORP 481 540 12.1% 653 / 460

    FMCG stocks closed mixed for the week. While gains were seen in Colgate (16%) selling pressure marked trading in HLL (7%). Selling in HLL was despite decent results announced by the company for the first quarter of CY07 (January to December fiscal), wherein it has reported a 14% YoY growth in topline, led by strong performances from the soaps & detergents and exports divisions. HLL's soap & detergent business (45% of totals sales) was the lead growth driver for the company's 1QCY07 topline performance. The business recorded sales growth of 10% YoY during the quarter, led by strong performances from its frontline brands like 'Surf', 'Wheel', 'Lifebuoy' and 'Lux'. The personal products division also raked in decent growth in reporting a 7% YoY increase in sales during 1QCY07. Together, HLL's 'HPC' (Home & Personal Care) business recorded a sales growth of 10% YoY during the quarter. HLL's consolidated operating margins have contracted by a marginal 40 basis points (0.4%) due to higher cost of goods sold. Net profits (excluding extraordinary adjustments) have grown by 14% YoY. Also, as reported on a leading financial website, HLL's Anglo-Dutch parent, Unilever has reported a 6% YoY growth in its 1QCY07 topline with operating margins expanding by 40 basis points to 13.7%.

    Top losers during the week (BSE A)
    Company Price on
    April 27 (Rs)
    Price on
    May 4 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    POLARIS SOFTWARE 187 170 -9.4% 237 / 52
    ICICI BANK 934 855 -8.4% 1,007 / 440
    UNITED PHOSPHOROUS 337 309 -8.1% 352 / 204
    ORIENTAL BANK 213 198 -7.2% 280 / 139
    HLL 210 195 -6.9% 295 / 166

    Aluminium stocks closed the week amidst strength as gains were seen in Hindalco (up marginally) and Nalco (up 2%). Buoyancy in Hindalco, India's largest private sector producer of aluminium and copper, was on the back of strong results announced by the company for the fourth quarter and full year ended March 2007. For 4QFY07 and FY07, the company's net profits have grown by 15% YoY and 55% YoY respectively on the back of topline growth of 30% YoY and 61% YoY respectively. Strong metal (aluminium and copper) prices globally, higher capacity utilisation (on the back of strong demand environment) and focus on value added products seems to have done he trick for the company during the fourth quarter and the fiscal. The board has recommended a final dividend of Rs 1.7 per share (dividend yield of 1.1%).

    With stock prices increasingly being dictated by the quality of results that companies are coming out with, it should be pertinent to add that a quarter's performance should not be given undue weightage. While for some companies, it might truly reflect a need for revision in expectations, for others, it might just be a temporary blip, either positive or negative. The key to successful investing is to zero in on few key value drivers and tracking their movement. It is important not to get lost in the huge mountain of numbers that one is exposed to. Happy investing.

     

     

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