Jun 25, 2005|
It was a week of records on the bourses as the bull mania continued this week, also helping the Sensex mark its 8th straight week of gains! This is the first time in this rally (since April 2003) that the index has sustained its gains for such a long time on a weekly basis. Continued strong FII inflows pushed the markets into a new orbit, in the process, breaking records. Both the benchmark indices made new lifetime highs this week.
It was party time for the bulls on Dalal Street, as the Sensex managed to achieve the much-awaited 7,000 levels this week. Led primarily by the strength in Ambani Group stocks, which have a high weightage in the Sensex (RIL and REL have a combined weightage of about 10%), the Sensex breached the coveted mark in the first trading session of the week. Despite the small corrections, buying support at lower levels helped the markets to not only sustain but also build on their gains. The day went down in history as the Sensex closed at its all-time high (!), though below the 7,000 mark. However, history was re-written on Tuesday and then Wednesday again as the Sensex kept scaling newer highs. Wednesday was another occasion to celebrate as the Nifty too scaled newer peaks. Though Thursday saw some correction, the losses were more than recouped on Friday as the Sensex got closer to the 7,200 mark and the Nifty breached the 2,200 levels in intra-day trades!
The prime reason for the rally having sustained this far is the sustained FII inflows that continue to flow into Indian equities (see chart above). As per reports, apart from the Japanese funds that have seemingly diverted their money to India from China in wake of the uncertainties which have cropped up in case of the latter, many FIIs from across countries like Europe, Australia, Canada, etc. have been bringing India under their investment radar. The fancy for Indian equities is seemingly derived from the fact that India continues to remain one of the fastest growing economies in the world and FIIs would want to participate in the Indian growth story. However, one grey area that prevented this week’s rally from being a broad based one was the fact that mid-cap stocks refused to participate for major part of the week. However, some buying was witnessed on Thursday and Friday, helping the CNX Mid-cap 200 index close with 1% gains for the week.
Top gainers over the week (NSE-50)
||Price on June 17 (Rs)
||Price on June 24 (Rs)
||52-WEEK H/L (Rs)
|BSE-SENSEX ||6,907 ||7,149 ||3.5% ||7,178 / 4,614|
|S&P CNX NIFTY ||2,123 ||2,194 ||3.3% ||2,204 / 1,438|
|CIPLA ||285 ||314 ||10.3% ||322 / 195 |
|HLL ||149 ||163 ||9.3% ||170 / 101 |
|HERO HONDA ||551 ||602 ||9.2% ||616 / 411 |
|RELIANCE ||600 ||655 ||9.1% ||660 / 400 |
|REL. ENERGY ||592 ||645 ||8.9% ||707 / 436 |
Coming to some sector/stock specific developments this week:
The suspense over the Reliance saga finally came to an end last weekend with the Ambani brothers coming to a seemingly amicable final settlement by agreeing to split the conglomerate. Mr. Mukesh Ambani will have the responsibility for Reliance Industries and IPCL while Mr. Anil Ambani will head Reliance Infocomm, Reliance Energy and Reliance Capital. The settlement boosted investor confidence in the company as the respective businesses are now set to have focus on governance. All the Reliance group stocks were in significant favour this week, with Reliance Capital going through the roof having gained almost 45%!
The much-awaited fuel price hike finally materialized this week, with petrol and diesel prices being raised by Rs 2.5 and Rs 2 a litre respectively. This comes after the government had frozen prices of these fuels for seven months, even as global crude prices touched all-time highs. Oil prices have soared to a new record of over US$ 59 a barrel (advantageous for ONGC – up 5%) and have risen by over 20% since the government last allowed oil companies to increase fuel prices. Cooking gas and kerosene prices have remained unchanged. However, oil marketing companies’ stocks like BPCL, HPCL and IOC remained out of favour. This pessimism towards downstream oil companies was owing to the fact that the increase in oil prices is much lower than expected. Thus, even after the said increase, oil-marketing companies are expected to continue to incur a loss of Rs 2.2 per litre on petrol and Rs 3 per litre on diesel. Energy stocks this week
Tata Steel (up 7%), a dominant player in the Indian steel industry, is contemplating its second overseas acquisition. It is on the look out for a company having capacity to produce 2 to 3 million tonnes of steel per annum. The company is eyeing the South East Asian region and China for the same. It should be noted that the company had last year acquired NatSteel in Singapore. These acquisitions will benefit the company in the long run as it will not only provide access to different markets but also a multi-locational production schedule which can enable it to improve on its operational and transaction costs. Steel stocks this week
Top losers over the week (NSE-50)
||Price on June 17 (Rs)
||Price on June 24 (Rs)
||52-WEEK H/L (Rs)
|BHEL ||875 ||849 ||-2.9% || 949 / 425|
|OBC ||268 ||261 ||-2.6% || 382 / 200|
|HDFC BANK ||597 ||582 ||-2.5% || 632 / 341|
|HPCL ||321 ||314 ||-2.3% || 417 / 262|
|PNB ||395 ||388 ||-1.7% || 520 / 220|
Hero Honda has launched 'Glamour', its 125-cc motorcycle. The company has positioned it in the deluxe segment (Rs 42,000 to Rs 48,000 price range) of the motorcycle market. The company intends to make a foray with 'Glamour' in the southern markets initially, before establishing a nationwide presence. As new product launches provide a significant boost to the revenues, this initiative could augur well for Hero Honda. The stock was on the investor radar this week (up 9%), as the beginning of the monsoons could have also aided sentiments, considering that rain dependant rural markets contribute a significant chunk of two-wheeler volume sales. Auto stocks this week
Going forward, while the markets have continued to defy gravity as yet, with the Sensex gaining almost 1,000 points in under 2 months, the risks associated with investing at current levels seem to have increased. While the index valuations at about 13 times FY06 expected earnings does not seem to be a screaming sell, considering that historically, our markets have traded in the region of about 15x to 17x earnings, at the same time, investors must understand that an index is a basket of stocks, many of which could be (or rather are) over valued. It wouldn’t be wrong to assume that many of these stocks are rising largely owing to their presence in the benchmark indices. This is because most of the FIIs, which invest in large caps, invest in index stocks.
Further, a close watch is warranted on the global liquidity factor, which is amongst the biggest reasons for the meteoric rise of Indian stockmarkets. While we would not advise investors to sit on total cash, we would certainly caution them and advise them to follow a staggered long-term investment approach to create wealth. Happy investing!
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 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
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 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
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