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It's a hat trick! - Views on News from Equitymaster
 
 
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  • Sep 11, 2004

    It's a hat trick!

    Oh no! We are not referring to Steve Harmison, the England player, who recently sent the Indian cricket team packing after he took a hat trick in the recently concluded Natwest Challenge. Rather, we are talking about our Indian stock markets, which after two weeks of consolidation (during mid-August) maintained their gaining spree. They have consistently gained ground for three consecutive weeks now. With the current week gains of 3%, the Sensex has gained approximately 6% in the last 3 weeks. The Nifty ended the week with 2% gains.

    Key gainers over the week (NSE-50)
    Company Price on
    Sept 3 (Rs)
    Price on
    Sept 10 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE-Sensex 5,218 5,370 2.9% 6,250 / 4,098
    S&P CNX NIFTY 1,634 1,669 2.1% 2,015 / 1,285
    CIPLA 235 261 10.9% 284 / 185
    HLL 111 121 9.3% 245 / 101
    HDFC 560 611 9.1% 700 / 450
    DABUR 69 73 6.9% 98 / 53
    ITC 1,039 1,106 6.5% 1,199 / 770

    Backed by gains of the past two weeks, the indices opened on a cautiously optimistic note. With the absence of any real trigger that could have provided the markets with something to cheer, the indices languished within a trading range, before showing some movement on Wednesday. They ended Thursday on a rather flattish note with a tinge of intra-day volatility. However, Friday was a different ball-game altogether, with bull scent having been felt right from start of trade. The indices headed northward without any major hiccups, giving the investors a reason to enjoy their weekend. Again, while there was no specific reason for these gains, there seems to some positivism amongst investors about India Inc.ís September quarter results. They even pretended to overlook the inflation numbers (8.33%) released on Friday on the back of expectations that this would be reigned in over the next few weeks. However, we reckon that strong global crude and metal prices continue to remain a cause for concern in the near-term.

    Key losers over the week (NSE-50)
    Company Price on
    Sept 3 (Rs)
    Price on
    Sept 10 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    ZEE 159 149 -5.9% 175 / 100
    BHEL 593 569 -4.0% 685 / 334
    MTNL 124 120 -3.5% 166 / 92
    ABB 787 770 -2.2% 850 / 445
    ONGC 708 697 -1.5% 1,000 / 510

    This week witnessed significant news based action on the bourses. Some prominent among these were:

    • Domestic pharma major, Cipla, has expressed confidence of maintaining the growth (20%) it witnessed in the first five months of the current fiscal throughout the year. It also sees its operating margins being maintained at last year levels (about 20%). Apart from this, its tie-up with US based Pentech Pharmaceuticals, wherein Cipla will provide finished dosage formulations for two products to the latter, has been accepted well by the markets. The products being supplied are not only witnessing strong growth in the US markets but will also aid Cipla in garnering higher margins.

    • Among the other top gainers this week, while there was seemingly no specific news that could have had prompted the buying in these stocks, the gains in ITC was a result of the news that the Supreme Court has indicated a favourable judgement in the Rs 8 bn excise case and has freed ITC of any liability to that extent. The company has, thus, chalked out expansion plans in the various business segments it operates in, which include retail, hotels, paper and its e-choupal initiative.

    • On the other hand, the weakness in Zee was a factor of the news that the acquisition of the telecast rights issue has come under cloud and has been drawn into court by ESPN-Star Sports and the court has asked Zee to re-bid for the telecast rights. In the new scenario, Zee, in order to outbid ESPN-Star Sports combine, would have to bid aggressively. If Zee gets the contract with higher bid, its profitability (from the telecast rights) will be affected and if it loses the contract, its intention of launching a sports channel might go on the back burner.

    To conclude, while not much has changed over the last few weeks in terms of the long-term positives for Indian markets and the near-term concerns, nonetheless, the indices have been consistently gaining ground. Just to put things in perspective, the Sensex has gained over 12% in the last 11 weeks. At the current juncture, while we continue to retain our stand over the optimistic scenario for equities, especially Indian equities, investors must keep in mind that this is a long-term perspective.

    Last but not the least, investment allocation based on one's risk-return profile, avoiding greed and fear, remaining focused on long-term investment, refusing to get hypnotized by market perceptions, keeping faith in your investments and avoiding giving effect to irrational, hasty and irresponsible decisions are just some of the qualities required to be successful in equity markets. Remember, while short-term trading is "hazardous to your wealth", over the long-term, one has a better chance of mitigating the risks involved in the short-term. Happy Investing!

     

     

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