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That 12k feeling again!

Sep 9, 2006

The week gone by has been very good for the markets, which saw the BSE-Sensex edge close to 12,000. The bulls continued to charge ahead in top gear this week, with the Sensex and the NSE-Nifty gaining 1.2% and 1% respectively. This was due to the easing crude oil prices, the possibility of the government not banning the participatory notes and strong US economic numbers reported last week, which had lifted the major indices over 1% on Monday. The trend in the Indian markets was largely in sync with the strength seen in global markets this week.Continuing from where it left off last week, the Indian indices opened the week on a strong footing and went on to achieve higher ground throughout Monday’s trade with the Sensex ending the day with near 136 points gains. Riding strong on the back of the rally witnessed on Monday, the bulls were adamant on marching ahead, which saw the markets fire again on Tuesday. Tuesday early trades were not much different from those of the previous day, as the Sensex had now breached the 11,908 -level. It came agonisingly close to the 12000-mark, touching an intra-day high of 11,983. There was good amount of buying interest in frontline stocks with metal index outperforming all key indices, as commodity prices firmed up at the London Metal Exchange (LME). Auto sector was also in action as the SIAM meeting held at Delhi saw top people of the auto industry making bullish statements on potential growth of volumes in sales and margins in years ahead.

During the week on Thursday the story was no different as the bull party continued. However, markets slid to a narrow range on Friday. On the last trading day of the week, the markets opened on a strong note, but while proceeding further, the indices lost some of their gains in the intra-day session and finally managed to close in the positive territory.As far as the institutional activity on the bourses was concerned, Foreign Institutional Investors (FIIs) were net buyers this week to the tune of Rs 15 bn. Domestic mutual funds (MFs) also turned out to be net buyers (Rs 7 bn).

Net investments
(Rs m) FIIs MFs Total
31-Aug-064,871 545 5,416
1-Sep-062,366 (1,180)1,186
4-Sep-064,511 (573)3,938
5-Sep-06 (695) 622 (73)
6-Sep-064,512 1,287 5,799
Total 15,565 701 16,266

The benchmark BSE Sensex closed higher during the last week by 1.2%. Amongst sectoral indices, BSE Metal led the list of gainers with a week on week gain of 5%. Metal stocks showed a rally during the week on the account of metal prices getting firmed on the London Stock Exchange.

Key indices over the week
IndexPrice on Sept 1(Rs)Price on Sept 8 (Rs)% Change
BSE AUTO505052073.1%
BSE BANKEX53845362-0.4%
BSE FMCG203420360.1%
BSE HEALTHCARE361036330.6%
BSE IT42874273-0.3%
BSE METAL815986265.7%
BSE Mid-cap484650414.0%
BSE OIL&GAS568857431.0%
BSE PSU556356541.6%
BSE Small-cap581460313.7%

Having looked the institutional activity in the last one-week, let us consider some sector/stock specific developments:

  • Energy major IOC has chalked out plans to focus on acquiring majority in only shallow water and on-land blocks in NELP VI. It must be noted that in NELP V, the company in consortium with Oil India Ltd (OIL) had unsuccessfully bid for minority stakes for all kinds of oil and gas exploration blocks, ranging from deep-waters to onshore. Considering the fact that IOC lacks expertise in deepwater exploration, the company has changed its strategy in NELP VI. Also, while its alliance with OIL will continue, the company is also looking to partner with new foreign companies, which will bring in the requisite technical as well as financial strength to the consortium. The stock was up 5.5% week-on-week. Other Energy Stocks.

  • Suzlon Wind Energy Corporation (SWECO), a subsidiary of Suzlon Energy A/S of Denmark, the international arm of Suzlon Energy, has signed a 105 MW deal with Edison Mission Group (EMG), for 50 units of Suzlon's S88-2.1 MW wind turbine. Though the deal size is not known, the delivery of the wind turbines is expected to begin in mid-2007. EMG will hold more than 400 MW of Suzlon wind turbine capacity in the US upon completion of the project. This group is the fifth largest owner of wind energy capacity in US, managing a portfolio of 10 projects with a capacity of 477 MW either in operation or under construction in four states. Suzlon has a current consolidated order book position of Rs 46 bn, with Rs 38 bn in international orders and Rs 8 bn in domestic orders. This order will further help the company to expand its global reach. The stock was down 0.6%week-on-week. Other Engineering Stocks.

    Top gainers during the week (BSE-A)
    CompanyPrice on
    Sept 1(Rs)
    Price on
    Sept 8 (Rs)
    H/L (Rs)
    BSE-SENSEX11,77811,9191.2%12,671 / 7,656
    S&P CNX NIFTY3,4353,4711.0%3,774 / 2,307
    HMT LTD648633.2%111 / 38
    TVS MOTOR9611721.3%187 / 77
    HINDUSTAN ZINC56265416.4%1,119 / 195
    CHENNAI PETRO19922513.4%281 / 143
    STERLITE IND42447411.7%614 / 138

  • The largest software company in Asia, TCS, is close to clinching a US$ 200 m core banking solution (CBS) contract from Bank of China - the second largest banking entity in China. This will be one of the major contracts bagged by an Indian IT company from that country. In 1QFY07, TCS saw strong traction in its key verticals, with banking, financial services and insurance (BFSI), telecom and manufacturing in particular witnessing good growth rates of 9.7% QoQ, 28.4% QoQ and 8.6% QoQ respectively. Emerging verticals such as retail and distribution also grew at a strong rate of 16.5% QoQ. Thus, TCS continues to deepen the breadth and depth of its services to serve a greater number of verticals. Company executives, have, however, declined to comment on the deal. The stock was down 0.6%week-on-week. Other Software Stocks.

    Top losers during the week (BSE-A)
    CompanyPrice on
    Sept 1(Rs)
    Price on
    Sept 8 (Rs)
    H/L (Rs)
    BRITANNIA1,0801,042-3.5%1,955 / 1,026
    HCL INFOSYS172163-4.9%279 / 116
    GODREJ CONSUMER177170-3.7%799 / 169
    BH.EARTH MOVERS963928-3.7%1,785 / 723

  • Amtek Auto, one of the leading forging and machining companies in India, is planning a major acquisition strategy for both the overseas and domestic markets in the current year. The company is currently in talks with 2-3 companies in Europe and the US for acquisitions. It is looking to make overseas acquisitions in the machining, casting and forgings areas. Beside this, on the domestic front as well, Amtek Auto is looking to acquire smaller companies. The company has already made eight acquisitions over the past four years. By following this strategy, it is planning to establish a worldwide presence. The stock was up 7.7% week-on-week. Other Auto Stocks.

With stocks across sectors getting fairly priced at the higher levels, investors, hereon, need to get extremely selective with their investments, not only in terms of fundamentals but also in terms of valuations. While the FM continues to reiterate his confidence on the Indian economy achieving an 8% GDP growth target this year and promises to uphold the sanctity of the FRBM targets, we believe, that the same will not be without several hiccups on the way. Nonetheless, careful and well-researched investments have historically stood the test of time and will continue to do so.

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