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It's a '6'er!

Jun 11, 2005

That's for the BSE-Sensex, as it has now gained 6 weeks in a row (up 9.6% in total). As far as the NSE-Nifty is concerned, it just missed achieving this as it closed with a 0.1% loss this week. The Sensex ended the week with 0.4% gains. While everything seemed fine until Thursday, it was the profit booking on Friday that spoilt the party.

The markets had a roaring start to the week as participants set aside their apprehensions with respect to the mixed signals emanating pertaining to monsoons. However, the buying strength waned in the face of intensified selling pressure as the bulls gave way to the bears in the final hour of trade and the markets collapsed. However, the following two days saw buying re-emerge as both - Foreign Institutional Investors (FIIs) and mutual funds (MFs) - put in money. It must be noted that after several weeks of selling, FII inflows have started turning positive again since last week, as can be seen in the chart above. But this was again followed by two successive days of profit booking. This seemed to have emanated largely from the retail side, as both the institutional categories were net buyers during the week. As far as the mid-cap segment was concerned, they displayed relative strength with the BSE-100, BSE-200 and BSE-500 indices ending the week with near 1% gains each.

Top gainers over the week (NSE-50)
COMPANY Price on June 4 (Rs)Price on June 10 (Rs)% CHANGE52-WEEK H/L (Rs)
BSE-SENSEX 6,753 6,782 0.4% 6,955 / 4,228
S&P CNX NIFTY 2,092 2,091 -0.1% 2,183 / 1,292
HDFC 770 842 9.4% 850 / 514
SHIPPING CORP. 150 161 6.9% 188 / 86
HDFC BANK 539 576 6.9% 632 / 341
VSNL 216 229 6.0% 252 / 130
REL. ENERGY 546 572 4.7% 690 / 436

Now let us consider some sector/stock specific news this week.

  • Shipping Corporation of India (SCI) was in the limelight this week after reports that the company has won a bid for transportation of 9 million tonnes (around 66 m barrels) of crude oil for IOC. Importantly, SCI won this bid against the likes of G.E. Shipping and Mercator Lines who were also in the fray. Further, the company is seemingly eyeing overseas acquisitions to expand its operations. The company board has approved a fleet acquisition programme worth US$ 500 m till FY09 and it plans to buy 14 vessels. SCI was up 7% this week. Other shipping stocks during the week

  • Reliance Energy (REL) was also amongst the key gainers in index stocks this week, up 5%. Apart from the fact that the company has chalked out major investment plans in the power sector, another reason that could have had helped improve sentiments was the news of Reliance Industries (RIL) having agreed to supply gas to the proposed 3,740 MW power project of REL at Dadri. This plant is expected to be the world's largest gas based power plant in a single location.

  • VSNL announced results this week. For 4QFY05, while revenues have grown by 16% YoY, profits are up a strong 386% YoY mainly due to a large extraordinary income of Rs 4.6 bn on account of profit on sale of its investment in New Skies Satellite N.V. and Intelsat Ltd. On the operating front, lower network costs have helped the company expand its margins. The company has recommended a dividend of Rs 6 per share (dividend yield of 2.7%). This includes Rs 1.5 per share as special dividend. The stock was amongst the key index gainers this week (up 6%). Other telecom stocks during the week

    Top losers over the week (NSE-50)
    COMPANY Price on June 4 (Rs)Price on June 10 (Rs)% CHANGE52-WEEK H/L (Rs)
    TISCO 353 334 -5.3% 447 / 179
    IPCL 172 164 -4.6% 221 / 133
    COLGATE 240 231 -3.9% 243 / 102
    TATA MOTORS 437 423 -3.3% 526 / 318
    HLL 151 146 -3.1% 170 / 101

  • Tata Steel is setting up an integrated steel plant, which will have the capacity to produce 5 m tonnes, with 2 m tonnes to be produced in the first phase. The focus of the plant will be on the long products segment. It is also planning to lease from the government an iron ore mine with reserves that can be tapped for the next 50 years. This steel plant will be completed in 6 years. This development is line with Tisco's stated plans of raising its steel capacity from the current 5 MT to 15 MT over the next half a decade. The stock, however, lost over 5% this week, much of the correction being a factor of the stock going ex-dividend (Rs 13 per share). Other steel stocks during the week

Going forward, while the markets would continue to witness volatility as further news flow in regarding the progress of monsoons, we would advise investors to look at their equity investments as a partnership with India Inc. Take a long-term view, research and then buy into the company you like. If your target price is achieved, be disciplined and exit. Market spurts/shocks will keep streaming in as years go by. Make sure you buy fundamentally strong companies, who stand tough in the face of irrational market behaviour by recovering their losses quickly, for their inherent value is strong. Happy investing!


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