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.
Out of the woods? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 17, 2004

    Out of the woods?

    Markets continued to grapple this week also, trying to find a direction. But, similar to their efforts in recent weeks, they failed again. Bogged down primarily by concerns related to monsoons, investors kept distance from the markets. The indices ended this week trading almost flat with very marginal gains.

    Now, looking at this week's trading, backed by two weeks of gains, the indices started on a subdued note. Monday's lacklustre trading could also be attributed to the investors wait for more clarity on some of the announcements made by the Finance Minister (FM) in the recently concluded Union Budget 2005. However, trades on Tuesday and Wednesday were marked by weakness, as investors seemed inclined to take some profits off the table. The markets struggled to find any reason to cheer. While uncertainty regarding any change to the turnover tax continued to remain among the reasons for the market's apprehensive behaviour, another factor and a more fundamental one - delay in monsoons - kept investors on the back foot.

    Key gainers over the week (NSE-50)
    COMPANY Price on
    July 9 (Rs)
    Price on
    July 16 (Rs)
    %
    CHANGE
    52-WEEK
    H/L (Rs)
    BSE-SENSEX 4,945 4,951 0.1% 6,250 / 3,534
    S&P CNX NIFTY 1,553 1,559 0.4% 2,015 / 1,089
    TISCO 306 339 10.8% 490 / 183
    SAIL 29 33 10.7% 62 / 19
    OBC 224 247 10.3% 367 / 149
    PNB 245 267 9.1% 397 / 149
    IPCL 150 162 7.7% 240 / 106

    This was because, as per the Indian Meteorological Department, while the monsoons have been below average as yet, their distribution has also been uneven, affecting crops in various regions. There are concerns that this delay in monsoons could also affect the yield of cash crops like cotton, grains and cereals. It must be noted that in order that our economy to clock the over 7% targeted growth rate, above average rainfalls are necessary. In the event of monsoons providing a setback, it would put to doubt India's growth prospects.

    Key losers over the week (NSE-50)
    COMPANY Price on
    July 9 (Rs)
    Price on
    July 16 (Rs)
    %
    CHANGE
    52-WEEK
    H/L (Rs)
    HERO HONDA 502 462 -7.8% 544 / 235
    BAJAJ AUTO 915 852 -6.9% 1,210 / 480
    M&M 511 477 -6.7% 525 / 162
    GRASIM 1,025 959 -6.4% 1,317 / 440
    BHARTI TELE 158 150 -5.1% 189 / 37

    However, Thursday and Friday's trade saw a reversal in trend of sorts as some clarity emerged over the above two issues turnover tax and monsoons. The Indian Metrological Department's statement of the monsoons resuming normalcy soon, the good 1QFY05 results as yet, by India Inc. and the news of certain breakthrough being arrived at pertaining to the transactions tax issue, all helped improve markets sentiments.

    Now, considering some key movers during the week from the table above, gains in steel stocks continued despite the setback provided in the budget in the form of an increase in excise duty by 4%. However, on the back of the near-term buoyancy in the sector and with the DEPB benefits (export incentives) having been restored for the industry, the near-term positive outlook seems to have revived. As far as the banking stocks were concerned, apart from the news that an inter-ministerial committee of the government has recommended that FII holdings in banking should be kept out of the FDI limit specified for the sector, which, if accepted, could pave the way for higher investments in the banking sector, good results by UTI Bank and HDFC Bank could have lifted sentiment for the sector.

    The top index losers this week included three auto stocks, which lost significant ground during the first half of the trading week (failing to recover fully) on the back of monsoon concerns, since rural demand forms an important part of two-wheeler sales. M&M's presence in the tractors segment kept the stock out of favour. Grasim's weakness, on the other hand, was owing to the announcement that the delay in monsoons has made the company cut the production of staple fibre by 80 tonnes per day. This constitutes around 11% of the company's total staple fibre production and thus, will seemingly have some financial impact on the company in the near-term, the impact of which would be seen in the September quarter results. Bharti Tele remained bogged due to profit booking as investors exercised caution towards the stock owing to continuing resistance towards the hike in FDI limit in the telecom sector, not just due to opposition from the party but also from allies of the current ruling coalition.

    However, while the markets may have recovered in the latter half of this week, the chart above clearly shows that the market is stuck in a strict trading range. While Foreign Institutional Investors (FIIs) seemed to have somewhat come to terms with the budget, which is evident from their positive investments into Indian equities (Rs 3 bn) in July so far, the question remains, are we out of the woods?

    Though it is nearly official now that the finance ministry has accepted the concerns pertaining to the liquidity issue owing to the turnover tax and will soon spell out the solution for this, some other distinct worries continue to remain. One being inflation that has notched up to 6.16% according to the latest numbers released, which only re-affirms the fact that hike in interest rates is imminent, which will adversely affect corporate balance sheets and low-interest rates dependant sectors like auto and housing. Second big threat is from the possibility of monsoons faltering, which would dent our GDP growth. The consensus estimates of 6.5%-7% Indian GDP growth would then have to be revised downwards. The third reason is high crude oil prices, which has once again crossed the US$ 41 per barrel mark, increasing the threat of jeopardizing global growth, leave alone India.

    However, despite the above concerns, while we believe that there is really no 'big' trigger in sight for the stock market in the near-term, there are good companies/sectors available at descent valuations from a 3-year perspective at current levels. Identify those and invest in a staggered manner so that the risk is distributed over a period of time. Happy Investing!

     

     

    Equitymaster requests your view! Post a comment on "Out of the woods?". 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.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    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 12:37 PM

    MARKET STATS