Extending gains... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Extending gains...

Sep 8, 2007

Markets extended their gains during the week, presumably on the back of assurances from Federal Reserve chairman Ben Bernanke and President George Bush that they would not let the US economy collapse. Though bears made their presence felt many times during the week with domestic indices closing in negative for 2 out of 5 trading sessions, the bulls weren't complaining as the BSE-Sensex and the NSE-Nifty ended the week with gains of 1.8% and 1% respectively.The week began on a positive note with BSE Sensex advancing more than 100 points on Monday, tracking strong global cues. Banking and pharma stocks led the rally. Infact, the BSE Bankex and the BSE Healthcare Index gained more than 1.5% each. In absence of any global cues, market traded within a narrow on Tuesday and Wednesday. While the BSE Sensex advanced by 43 points on Tuesday, it shed 19 points on Wednesday. The bulls were back on Thursday, as the BSE Sensex gained 170 points to close at 15,616. Though markets opened on a negative note, the index pared all its losses and proceeded to trade higher for the rest of the trading and finally closed with a gain of 1.1%. Although Friday started on a positive note, market pared early gains as fresh selling emerged in later half of the day when European markets drifted lower. The BSE Sensex finally closed the day with a marginal loss of 26 points.

On the institutional activity front, between 31st August and 6th September, Foreign Institutional Investors (FIIs)and mutual funds both emerged as net buyers to the tune of Rs 29 bn and 8 bn respectively.

(Rs m)MFs FIIs Total
31-Aug4,636 6,773 11,409
3-Sep1,425 5,277 6,702
4-Sep989 6,304 7,293
5-Sep674 4,104 4,778
6-Sep452 6,231 6,683
Total8,176 28,689 36,865

The week belonged to the mid-cap and small-cap counters, who were left behind in the recovery witnessed last week. The BSE Small Cap and the BSE Mid Cap Index ended the week with a gain of 4.6% and 3.7% respectively. Among sectors, the BSE Healthcare and the BSE FMCG emerged as the key gainers (each up 4%).

IndexAs on August 31As on September 7% Change
BSE IT4,586 4,660 1.6%
BSE SMLCAP8,061 8,434 4.6%
BSE OIL AND GAS8,160 8,186 0.3%
BSE HEALTHCARE3,573 3,706 3.7%
BSE AUTO4,878 4,890 0.2%
BSE PSU7,095 7,288 2.7%
BSE MIDCAP6,608 6,852 3.7%
BSE FMCG1,974 2,047 3.7%
BSE BANKEX7,859 8,096 3.0%
BSE METAL11,566 11,609 0.4%

Now let us have a look at some of the key stock/sector specific developments during the week:

Pharma stocks closed firm with Sun Pharma (up 9%), Cipla (up 8%) and Ranbaxy (up 5%) leading the pack of gainers. As per a leading business daily, Ranbaxy has completed the second phase of the clinical trials of a revolutionary anti-malarial drug that could enable it to be the nation's first pharmaceutical company to launch a New Chemical Entity (NCE) globally. The company has just finished phase II clinical trials and is doing a phase II for the combination of that product. If everything continues to be successful, Ranbaxy will be able to launch the NCE in the market by 2011. While two to three dozen new molecules are being developed for cardiovascular, arthritis, diabetes and oncology, there have been just two products launched in the last 30 years for malaria. Though the market size is considered small the competition is not likely to be intense.

Top gainers during the week (BSE A)
CompanyPrice on
Aug 31 (Rs)
Price on
Sep 7 (Rs)
H/L (Rs)
BSE SENSEX15,319 15,590 1.8% 15,869 / 11,444
S&P CNX NIFTY4,464 4,510 1.0% 4,648 / 3,328
NIIT125 154 22.5%170 / 40
CENTURY ENKA118 140 18.3%164 / 112
RAMCO SYSTEMS145 168 15.9%233 / 119
LIC HOUSING186 214 15.2%221 / 128
HCL INFOSYS199 229 15.1% 230 / 125

As per a leading business daily, Reliance Industries (RIL) has acquired Mauritius-headquartered Gulf Africa Petroleum Corporation (Gapco), a petroleum distribution company with an extensive network and large storage facilities in east Africa. RIL acquired the company through its wholly owned subsidiary, Reliance Industries Middle East (RIME), a company registered in the United Arab Emirates. Gapco owns and operates large storage terminal facilities and a retail distribution network in Tanzania, Uganda and Kenya. It also owns and operates large storage terminals in Dar-es-Salaam in Tanzania, Mombassa in Kenya, Kampala in Uganda and has other well-spread depots in east and central Africa. It also operates more than 250 outlets covering retail and industrial segments. The imports of petroleum products into these countries are expected to rise in the near future and the east African countries have rapid economic growth and progressive government policies in place. The acquisition is a strategic fit for RIL's exports from the country and a step towards achieving its global vision in the petroleum downstream sector by integrating the entire value chain consisting of refining, shipping, trading, terminalling and marketing through retail and wholesale segments. While RIL closed flat, Cairn India gained 2% during the week.

Top losers during the week (BSE A)
CompanyPrice on
Aug 31 (Rs)
Price on
Sep 7 (Rs)
H/L (Rs)
WELSPUN GUJ. STAHL247231-6.8%264 / 65
JINDAL STAINLESS165156-5.3%178 / 95
BALAJI TELEFILMS264250-5.3%278 / 104
EIH LTD114109-4.5%127 / 88
PIDILITE149143-3.8%160 / 93

Reliance Energy is planning to hive off its engineering, procurement and construction (EPC) division into a new company. REL is considering the option to list the new company to raise funds for its projects. The EPC division has an order backlog of Rs. 70 bn. The EPC division's revenue was Rs 20.8 bn in FY07, almost a third of company's total revenue of Rs 65.8 bn. The EPC division has contributed about 8% of the net profit of Rs. 8 bn of Reliance Energy. While Reliance Energy gained 9%, Tata Power advanced by 5% for the week.

With markets close to their all-time highs, dangers of overvaluation in select sectors have once again surfaced. While on an aggregate basis, the markets do look adequately valued, it should be remembered that not all sectors have participated in the current rally. Hence we advise investors, to closely monitor the risk-return equation in overheated sectors.

Equitymaster requests your view! Post a comment on "Extending gains...". Click here!


More Views on News

Better Days Ahead for the Markets (Fast Profits Daily)

Oct 22, 2020

Commodity prices are signalling an economic recovery.

Will Blackstone Group Manage L&T Mutual Fund's Assets Successfully? (Outside View)

Oct 22, 2020

PersonalFN explains whether Blackstone will be able to successfully manage L&T mutual fund's assets in the event of a potential acquisition.

Your "I Was There" Moment in History Could Be Today...Don't Miss It (Profit Hunter)

Oct 22, 2020

The last time such a moment showed up in history, few investors grabbed a 65 bagger.

An Update for Those Looking to Trade Crude Oil and Natural Gas (Fast Profits Daily)

Oct 21, 2020

Trading crude oil and natural gas in the near future will be challenging. Here's why...

Will Pharma and Healthcare Funds Improve the Health of Your Portfolio? (Outside View)

Oct 21, 2020

The COVID-19 pandemic has turned to be a high-growth opportunity for India's Pharma and Healthcare Sector.

More Views on News

Most Popular

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

The 'Seedhi Baat, No Bakwaas' View on ITC (Profit Hunter)

Oct 12, 2020

Is ITC an investment or a speculation at current levels?

One of the Best Investment Opportunities in the Market Right Now (Fast Profits Daily)

Oct 16, 2020

The one sector that you should be looking at to make good profits.

The Inflection Point for Defence Stocks is Getting Closer (Profit Hunter)

Oct 9, 2020

Few Indian defence companies could use their engineering capabilities to eventually become global leaders.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Oct 22, 2020 (Close)