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.
Correction blip or…? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 25, 2004

    Correction blip or…?

    This week’s trade on the Indian bourses seemed largely in the nature of some consolidation considering the smart rally that has been witnessed over the past few weeks. Investors, this week, preferred to book some profits at higher levels, which kept the indices in a narrow range, finally closing the week with about 0.6% losses.

    The indices had a rather subdued start to this week, as investors opted to exercise caution post the near 4% gains witnessed last week. However, this dullness was not to last long as after Monday’s lacklustre trading, investors continued their buying spree. Buying across the board pushed the Sensex beyond the 5,600 levels on Tuesday, which was sustained even on Wednesday. The euphoria was, however, followed by some profit booking at higher levels on the back of unfavorable news on the global crude oil front and domestic inflation front. It must be noted here that there has been no real trigger that could be credited for the sharp rally witnessed over the past 3-4 months, though valuations (then and now) continue to remain compelling over a long-term horizon. Investors, more so the FII community, seem to be thinking on similar terms as is evident from the near Rs 50 bn pumped in by them over the last 3 months into Indian equities.

    The big and the most awaited news this week was the Federal Reserve’s stance on US interest rates, which were raised by 25 basis points (0.25%) to 1.75%. The Fed Committee, while maintaining a positive outlook towards US economic growth stated that the upside and downside risks to the attainment of sustainable growth and price stability for the next few quarters remains to be roughly equal. We feel that this hike in interest rates could be of some concern to Indian stock markets as the FII money, which has been the lifeline of the rally since early 2003, could change course back to the US. This is because the case for India is not just based on long-term growth prospects but also the relative attractiveness (for a given level of risk, if US becomes more attractive than India, institutional investors could pare their exposure to India). However, we reckon this to be only a temporary phenomenon as the Indian growth story continues to be enthusing.

    Among the other news on the bourses, 3 new stocks got listed on the bourses on Friday – Indiabulls, Crew BOS and Sah Petroleum. While the first two stocks closed with 25% and 35% premiums respectively on their debut, Sah Petroleum ended the day at a 5% discount to its offer price. Staying with IPOs, the much-awaited NTPC issue is slated to hit the bourses around Diwali (second week of November). It must be noted that the NTPC public issue, which has been priced in the Rs 52-62 band, will be open from October 7 to October 14 for which the road shows have already begun. We will soon put up a detailed analysis of the IPO on our website.

    Among other corporate developments, pharma stocks remained active during the week with buying witnessed across both, large-caps as well as mid-caps. The biggest gainer in this pack was Glenmark Pharma (up 27%), which has out-licensed its anti-asthma NCE (new chemical entity) to Forest Laboratories (US) for an upfront payment of US$ 10 m. The company will also receive milestone payments and will receive royalties when the drug hits the market. Among others, while the optimism towards the Sun Pharma stock (see table below) was seemingly owing to the news of its acquisition of three new drugs, gains in Cipla continued on the back of a positive outlook towards the company. However, next week, pharma stocks could remain volatile considering the Ministry of Chemicals and Fertilisers stance towards controlling the pricing of drugs.

    Key gainers over the week (NSE-50)
    Company Price on
    Sept 17 (Rs)
    Price on
    Sept 24 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE-SENSEX 5,561 5,528 -0.6% 6,250 / 4,228
    S&P CNX NIFTY 1,734 1,723 -0.6% 2,015 / 1,292
    ICICI BANK 275 292 6.2% 352 / 190
    CIPLA 271 286 5.7% 289 / 192
    BAJAJ AUTO 940 991 5.4% 1,210 / 720
    SUN PHARMA 401 417 3.9% 427 / 218
    IND. HOTEL 425 441 3.9% 492 / 246
    Note: Click on the link above to read our latest view on the company/sector.

    Among the top losers this week were Zee Tele and BPCL. While concerns over the awarding of the BCCI cricket telecast rights (the case is pending in the Supreme Court) continue to haunt the Zee Tele stock, rising crude prices adversely affected the BPCL stock. It must be noted that since BPCL cannot pass on the rise in crude prices (its raw material) to the consumers, its margins are likely to come under pressure if petroleum product prices are not raised. However, with the inflation near 8% levels, it is highly unlikely that the government would allow the oil marketing companies to raise prices. HPCL also lost 2% during the week.

    Key losers over the week (NSE-50)
    Company Price on
    Sept 17 (Rs)
    Price on
    Sept 24 (Rs)
    % Change 52-Week
    H/L (Rs)
    GRASIM 1,195 1,120 -6.3% 1,317 / 582
    BPCL 372 350 -5.7% 533 / 230
    INFOSYS 1,690 1,614 -4.5% 1,712 / 928
    HLL 126 120 -4.2% 245 / 101
    ZEE TELE 157 150 -4.0% 175 / 100
    Note: Click on the link above to read our latest view on the company/sector.

    Apart from profit booking at higher levels, the party poopers this week seemed to be crude prices and inflation. While crude prices once again inched towards the US$ 49 per barrel mark, domestic inflation was higher than last week’s 7.81%, at 7.87%. It must be noted that, going forward, both these issues are potential threats to the sustenance of global economic growth, including India as these would lead to an imminent rise in interest rates affecting corporate profitability. Nonetheless, over the long-term, equities are likely to remain amongst the best performing asset classes, albeit with a higher risk component. However, a staggered investment approach with focus on only fundamentally sound companies would be the apt strategy for enhancing the returns from one’s portfolio. Happy investing!

     

     

    Equitymaster requests your view! Post a comment on "Correction blip or…?". 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.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    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.

    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.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    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 18, 2017 (Close)

    MARKET STATS