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India Inc. passes market test!

Aug 2, 2003

The results season finally comes to an end. And for sure, the results have brought more cheers to the market rather than gloom. There may have been few disappointments on the results front, but overall, the good corporate results only reaffirms our belief in the growth prospects of India Inc. going forward. Though there may be some results yet to be announced, practically all the major industry stalwarts have gone through the market test, some outperforming the broader indices while some others facing investor wrath. In the week just ended, the BSE Sensex gained 2.4% while the NSE Nifty notched gains of 2.8%.

Top 5 Sensex gainers/losers during last month
Company Price on July 2 (Rs) Price on August 1 (Rs) % CHANGE
BSE-SENSEX 3,601 3,815 5.9%
ZEE TELE 94 119 26.1%
TISCO 173 214 23.9%
A.C.C. 165 202 22.6%
INFOSYS 3159 3784 19.8%
TATA MOTORS (TELCO) 205 239 16.7%
CASTROL 211 202 -4.6%
BHEL 277 263 -4.8%
ITC 759 721 -5.0%
HLL 177 168 -5.3%
HPCL 346 322 -7.1%

This week’s roundup cannot go ahead without first talking about the two big results announced this week. One of them being Reliance, which announced its results on Thursday. The company reported a 17% improvement in total income for 1QFY04 while its bottomline was higher by about 20%. Petroleum products saved the day for the company, as its petrochemicals segment did not perform well, registering negative growth. Though there was some pressure witnessed on the company's margins, softening of crude prices is likely to benefit the company in the near term. Moreover, with the petrochemicals cycle already in an upturn, the company will benefit from better price realisations. The company is expected to start its retail outlets by FY05 and this will further benefit it in terms of increased integration. Also, it seems too early to write off Reliance's WiLL story as of now.

(Click here for detailed analysis of Reliance results).

Top 5 gainers over the week
COMPANY Price on July 25 (Rs) Price on August 1 (Rs) % CHANGE 52-WEEK H/L (Rs)
BSE-SENSEX 3,726 3,815 2.4% 3,836 / 2,828
S&P CNX NIFTY 1,163 1,196 2.8% 1,199 / 920
TATA FINANCE 30 50 63.7% 51 / 14
KOCHI REFINERIES 75 109 44.9% 114 / 36
GILLETTE INDIA 371 480 29.4% 530 / 260
TATA INFOTECH 193 249 29.2% 257 / 119
AVENTIS PHARMA 366 435 19.0% 447 / 235

The other big result was that of FMCG major, HLL, which too announced its June quarter results on Thursday. It reported a 3% increase in its topline in 2QFY04 and nearly 13% bottomline growth excluding extraordinary items. It must be noted that the company is a December ending company. The operating margins also displayed some strength. For HLL, the company's restructuring measures i.e. focusing on 30 power brands and hiving or selling of non-core businesses, have started to yield results in the form of better margins and profitability. Moreover, HLL has been showing a marked improvement in quarterly sales growth (-10% in 1QFY03 to +3% in 2QFY04). Over the long-term, management credibility, branding skills and logistical strength will continue to keep HLL in the investors' radar.

(Click here for detailed analysis of HLL results).

Top 5 losers over the week
COMPANY Price on July 25 (Rs) Price on August 1 (Rs) % CHANGE 52-WEEK H/L (Rs)
SILVERLINE TECH 8 7 -15.1% 32 / 5
MOSER-BAER INDIA 361 306 -15.0% 375 / 137
APOLLO TYRES 178 154 -13.5% 195 / 92
LML LTD. 45 40 -13.1% 48 / 26
PENTAMEDIA 10 9 -12.1% 33 / 7

There were some other important results announced during the week including HPCL, BPCL, L&T, Zee, M&M, Grasim and Gujarat Ambuja.

In terms of developments over the week, the whole of the corporate world, analysts and investors were glued into results. However, now that the results season is over, the focus will shift from individual companies to more macro views and the economy as a whole. Going into next week, the markets will open with a fresh perspective and with a view towards, probably the next quarter results! Yes, all markets are forward looking and are quick to factor in the forward growth of companies on the back of good economic growth. It must be noted that the Sensex and the Nifty have already gained 25% and 22% respectively in FY04 so far. If you ask for our pick, we believe that there are a lot of opportunities out there, albeit for the long-term. What one needs is sound, unbiased and fundamental research to identify these opportunities!

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