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Investors 'SAIL'ing high - Views on News from Equitymaster
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  • Jun 25, 2002

    Investors 'SAIL'ing high

    The list of top ten gainers amongst BSE 'A' group stocks over the past one-month has a very interesting topper, SAIL. The stock price has increased over 100% during the past month. What is more interesting is that Infosys figures third in the list of top ten losers.

    Top gainers BSE 'A' Group from May 21st 2002 to June 24th, 2002
    Jun 24, 2002 (Rs) May 21, 2002 (Rs) H/L (Rs)
    SAIL 11.4 5.6 102.7% 13 / 4
    SESA GOA LTD. 106.0 58.5 81.4% 118 / 42
    CENTURY IND. 66.5 37.0 79.7% 70 / 23
    GSFC 37.6 21.0 79.0% 41 / 9
    UNITED PHOSPHORUS 141.0 80.7 74.7% 150 / 27
    LML LTD. 43.0 25.2 70.4% 46 / 11
    APOLLO TYRES 116.8 69.8 67.4% 129 / 37
    TITAN IND. 85.1 51.4 65.7% 85 / 23
    JINDAL STEEL 261.0 162.3 60.9% 254 / 111
    ARVIND MILLS 23.5 15.0 56.3% 23 / 7

    What makes the observation so interesting is that while the loser has about Rs 7 bn in its books as cash, the topper, SAIL, reported a 3.5% drop in the topline, while posting a net loss of Rs 17 bn for FY02. Read more. The company might be referred to the BIFR if it continues to perform in a similar manner. But that does not seem to be bothering the investors. The voice of reason has been snubbed by the greed to make a quick buck.

    Top losers BSE 'A' Group from May 21st 2002 to June 24th, 2002
    Jun 24, 2002 (Rs) May 21, 2002 (Rs) H/L (Rs)
    TRIGYN TECHNOLOGIES 36.4 50.4 -27.7% 110 / 21
    CMC LTD. 540.5 627.7 -13.9% 749 / 192
    INFOSYS 3,193.1 3,618.7 -11.8% 4,861 / 2,156
    SUN PHARMA 555.0 623.3 -11.0% 706 / 410
    HIND.ZINC 33.1 37.1 -10.8% 38 / 11
    CIPLA 933.5 1,038.4 -10.1% 1,340 / 925
    APOLLO HOSPITALS 130.7 145.0 -9.9% 175 / 54
    VSNL 165.0 182.8 -9.7% 202 / 113
    AVENTIS PHARMA 371.2 411.0 -9.7% 474 / 330
    HCL TECHNOLOGIES 207.0 224.4 -7.7% 365 / 103

    The problem in trying to make a quick buck is that as a retail investor the risk of getting stuck with dud stocks is very high. Firstly, you are not privileged to the on goings amongst the various market movers. And when they exit quickly, hapless retail investors can do nothing but watch their investments being locked at lower circuits everyday, right at open.

    It would take a lot of courage, to go against the markets but it is old stock market wisdom to buy when everybody is selling. Currently, steel has been in favour due to recovery of steel prices globally, while the technology sector continue to witness selling on the back of weakness in the US economy and gloom in the technology sector.

    However, the technology sector in India is showing initial signs of recovery. Advertisements for recruitment have increased and the companies are witnessing increased inquiries for their service offerings. To quote Mr. S. Gopalakrishnan, COO, Infosys, '...secondly for larger companies there is a new set of projects opening up. We were not bidding earlier for these projects. Now, large Indian companies are being considered for these contracts. It's a question of time before we see some large business coming in.'

    Again Oil PSUs lined up for divestment to seem to have fallen out of favor with the markets. While divestment could cause the stock prices to move further north. However, the point is that the stock price for the companies is supported to a large extent by fundamentals. Therefore, the element of risk could be relatively lower. But the reason for the stock being out of favour is that it will take sometime may be until end of the year before the divestment of these companies actually gets going.

    Then there is the FMCG sector that has formidable companies. However, these too are once again out of favour. For the past week or so there have been talks about the economic scenario improving. Second year of strong growth for the agricultural sector could mean better business environment for the FMCG companies.

    All the stocks that figure in the gainers list are relatively smaller companies and are less researched. There is a limited amount of information available on these companies. Thus, before you invest please do your homework. Otherwise, you might just get caught in a dead cat bounce.



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