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Markets take a breather... - Views on News from Equitymaster
 
 
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  • Sep 15, 2007

    Markets take a breather...

    After two weeks of continuous gains, markets took a breather last week gone by with the BSE-Sensex and the NSE-Nifty ending the week with marginal gains of 0.1% and 0.2% respectively. Though bears made their presence felt many times during the week, with domestic indices closing in negative for 4 out of 5 trading sessions, the bulls managed to scrape through.

    The last week began on a negative note with the BSE Sensex opening more than 170 points down on Monday, tracking weak global cues. The markets however witnessed an amazing turnaround with the index finally closing flat for the day. The bears dominated the volatile markets for the next two days, with the BSE Sensex shedding 55 points and 37 points on Tuesday and Wednesday respectively, after firm openings. The bulls made a comeback on Thursday with the BSE Sensex gaining more than 100 points (0.7%). The rally was led by auto, banking and software stocks. 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 11 points.

    On the institutional activity front, between 7th and 13th September, while Foreign Institutional Investors (FIIs) emerged as net buyers to the tune of Rs 12 bn, mutual funds sold equities worth Rs 2 bn.

    (Rs m) MFs FIIs Total
    7-Sep (1,877) 5,809 3,932
    10-Sep 101 (629) (528)
    11-Sep (1,793) 4,456 2,663
    12-Sep 733 2,819 3,552
    13-Sep 802 (466) 336
    Total (2,034) 11,989 9,955

    On the sectoral indices front, the BSE Metal Index and the BSE Oil & Gas Index ended the last week with a gain of 3.2% and 2.5% respectively, while the BSE Infotech Index emerged as the key loser (down 4.5%).

    Index As on September 7 As on September 14 % Change
    BSE IT 4,660 4,449 -4.5%
    BSE SMLCAP 8,434 8,573 1.7%
    BSE OIL AND GAS 8,186 8,387 2.5%
    BSE HEALTHCARE 3,706 3,666 -1.1%
    BSE AUTO 4,890 4,885 -0.1%
    BSE PSU 7,288 7,300 0.2%
    BSE MIDCAP 6,852 6,897 0.7%
    BSE FMCG 2,047 2,073 1.3%
    BSE BANKEX 8,096 8,136 0.5%
    BSE METAL 11,609 11,980 3.2%

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

    The empowered group of ministers (EGoM) has approved the pricing formula proposed by RIL for its Krishna-Godavari (K-G) basin gas. The group however did make minor modifications that reduced the delivered price of gas. The decision of the EGoM will lead to a price of US$ 4.20 per million British thermal units (mbtu) at delivery point. The approved price is 8.3% lower than that proposed by contractors. The EGoM managed a reduction in price by sticking to dollar pricing for the K-G gas (instead of rupee pricing) and capping the price of crude in the variable portion of the formula at US$ 60 per barrel, instead of US$ 65 proposed by RIL and its partner, Niko Resources. Since there is no re-pricing to be done, the company's gas production schedule would not be affected. RIL is slated to start production of 40 million standard cubic metre per day (mscmd) of gas from the K-G basin by July 2008 and ramp it up to a peak production of 80 mscmd subsequently. However, confusion on how much of this gas would be available to users exists as most of RIL's K-G basin gas is already locked up with Reliance Natural Resources (RNRL), NTPC and for captive use by RIL. While Reliance advanced by 4%, ONGC lost close 2% during the week.

    As per leading business news daily, Essel Propack, is in talks to acquire a packaging unit of Alcan. The deal, if successful, would catapult Essel Propack, to the top position in personal care packaging. Alcan Packaging had posted sales of US$ 800 m last year. Essel Propack has relatively smaller presence in the personal care packaging segment. Alcan's packaging business includes packaging for food and beverage, medical and pharmaceutical, cosmetics and tobacco. Alcan Packaging has some of the world's leading cosmetics and beauty companies as its customers. The deal would boost Essel Propack's profitability as a cosmetic, as a business segment, is growing fast in Asia, thanks to rising incomes. The stock declined by 1% during the week.

    Top gainers during the week (BSE A)
    COMPANY Price on July 20 (Rs) Price on July 27 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BSE SENSEX 15,590 15,604 0.1% 15,869 / 11,834
    S&P CNX NIFTY 4,510 4,518 0.2% 4,648 / 3,420
    INDUSIND BANK 55 66 19.4% 68 / 37
    JINDAL STEEL 3,915 4,619 18.0% 4720 / 1546
    WELSPUN GUJ. STAHL 230 264 14.7% 278 / 65
    NEYVELI LIGNITE 83 95 14.5% 99 / 49
    RELIANCE CAPITAL 1,224 1,392 13.8% 1437 / 513

    Telecom stocks closed mixed with Tata Teleservices (up 4%) and Idea Cellular (up 1%) featuring among the key gainers, while Spice Communications (down 3%) and Bharti Airtel (down 2%) closed in the red. As per leading business daily, GSM operators added 5.9 m subscribers in August 2007 to take their total subscriber base in the country to 147.7 m, according to figures released by the GSM representative body, Cellular Operators' Association of India (COAI). Bharti Airtel, added 2.1 m users in August, lifting its user base to 46.8 m. It now has a 31.7% share of the GSM market. Vodafone Essar added 1.7 m users to take its subscriber base of 34.1 mn. It has a 23.1% share among GSM operators. Idea Cellular gained 0.9 m subscribers in August, lifting its user base to 17.9 m, giving it a GSM market share of 12.1%.

    Top losers during the week (BSE A)
    COMPANY Price on July 20 (Rs) Price on July 27 (Rs) % CHANGE 52-WEEK H/L (Rs)
    ROLTA INDIA 518 446 -13.9% 525 / 205
    HCL TECH 310 279 -9.9% 366 / 267
    CMC LTD 1,129 1,019 -9.8% 1550 / 494
    IGATE GLOBAL 250 228 -8.8% 432 / 172
    WIPRO 478 450 -5.9% 690 / 436

    In the absence of any fresh triggers, markets are expected to remain range-bound. Crude oil prices, which reached an all-time new high to close above US$ 80, remained largely ignored by the markets. A further rise in crude prices could however spell trouble for the financial markets. Though domestic indices showed some resilience to weak global cues during the week, Friday's close suggest we are yet to 'de-couple' from the global markets. Hence, we advise investors to not get swayed by all these short-term factors (read noise) and instead concentrate on companies with strong fundamentals and good management that are likely to provide adequate returns on investment.

     

     

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