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.
August 2006: The return of the indices - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 28, 2006

    August 2006: The return of the indices

    Initial feelers post the 1QFY07 results turned out to be very positive and investors reposed full faith in the market's ability to rise further from the lows of May 2006. If August is any indication, then the investing community has surely 'walked the talk'. The indices have performed admirably and if any one would have invested in the markets based on the positive results from India Inc, he would have walked away richer by Rs 11 on every Rs 100 invested. However, this is just the story of the indices and there were stocks that far exceeded this return. Let us have a look at the top five stocks from the Nifty that gained the most in the past month, a month that marked the return of the indices.

    July'06 August'06 % change
    BSE-Sensex 10,416 11,572 11.1%
    NSE-Nifty 3,041 3,386 11.3%
    PNB 346 454 31.2%
    Siemens 839 1,051 25.3%
    M&M 529 652 23.3%
    BHEL 1,830 2,250 23.0%
    Suzlon Energy 992 1,215 22.5%

    PNB - Renewed interest
    Perched right on top is PNB, India's second largest PSU bank. The counter has gained 31% in one month, impressive by any yardstick. Although the fundamentals of the bank were never in doubt - it enjoys one of the highest NIMs among all the banks in the country - its growing NPAs had become a cause for concern in recent times. However, things seem to be changing now as aggressive provisioning has enabled the bank to clean up its balance sheet and bring down the level of NPAs to reasonable levels. The bank enjoys one of the highest percentages of low savings deposits and this will hold it in good stead in the current rising interest rate scenario. On account of these positive factors, investors have rewarded the stock and have put it right on top in the list of gainers in the past month. We believe that after the recent run, most of the near-term upside seems to have taken care of, but remain positive on the long-term prospects of the company.

    BHEL, Siemens & Suzlon Energy: Packing a 'power'ful punch
    For a developing country like India, the need for uninterrupted and cost effective supply of power cannot be emphasized enough. As per estimates, if the current growth in the economy needs to be sustained, India will need to add a whopping 100,000 MW of generation capacity in the next 10 years! To put things into perspective, this is almost equal to the current capacity in the country. Little wonder then, that power generation and transmission equipment companies like BHEL, Siemens and Suzlon Energy have become the favorites of growth and value investors alike.

    Courtesy the continued flow of big-ticket orders during 1QFY07, these companies have emerged among the top five gainers in the past month. While Siemens has gained 25% and has occupied second place, BHEL and Suzlon Energy have each reported a gain of 23% and have stood at fourth and fifth places respectively in the period under consideration. As far as our opinion is concerned, although these companies have strong order book visibility and proven execution capabilities, valuations seemed to have factored in near-term growth and hence, the risk is slightly on the higher side.

    M&M - Hands in many pies
    Completing the list is M&M, India's largest UV and farm equipment manufacturing company. The company has added a sizeable 23% to its market cap in the last month. The optimism towards the company has seemingly stemmed from the fact that the automotive business, the company's mainstay, is now not the only one driving its growth, but its investments in growth sectors like real estate and software have also started yielding rich dividends. While the divestment of some of its stake in Mahindra Gesco and M&M Financial Services earlier helped it unlock significant value, the impending IPO listing of Tech Mahindra, its tech subsidiary, is likely to give a further fillip to its fortunes. Going forward, while rising interest rates and crude prices might subdue the performance of its automotive division, the immense potential of its subsidiaries could well ensure that M&M's growth engine keeps on chugging.

    Conclusion
    Having had a look at the top five stocks in the past month, one thing emerges - while growth in these companies is far from reaching its peak, current valuation levels are slightly disturbing. While we have full faith in the long-term India story, selecting a fundamentally strong value stock based on a 2 to 3 year horizon is getting increasingly difficult. It will be as crucial at this juncture to identify the potential downside, as it will be to analyse future growth prospects, which is what we have always maintained. Happy investing!

     

     

    Equitymaster requests your view! Post a comment on "August 2006: The return of the indices". 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.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    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 17, 2017 (Close)

    MARKET STATS