Tone down expectations - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

Tone down expectations

Oct 3, 2003

Going by the trend in the stock markets over the last six months or so, indications are that there is no stopping at this point in time. Though there are apprehensions about the forthcoming election, the undertone is bullish. If one were to look at the top five gainers over the last month or so, large market capitalization stocks are completely absent. Just to put things in perspective, the top gainers list in the BSE 'A' group goes like this HCL Infosys, Aurobindo Pharma, Sesa Goa, Moser Baer and Saw Pipes. Except from some stocks like Ashok Leyland, P&G, M&M, Infosys and Zee, the top 25 gainers list consist primarily of mid-cap stocks.

Top 5 gainers…
CompanyPrice (Sep 1st, 2003)Price (Oct 3rd, 2003)(% change)
Sensex 4,325 4,531 4.8%
Nifty 1,376 1,446 5.1%
HCL Infosys 159 310 94.3%
Sesa Goa 223 310 39.0%
Aurobindo Pharma 483 663 37.3%
Saw Pipes 168 230 36.6%
Moser Baer 283 386 36.2%

Domestic small cap pharma stocks have been in the limelight in recent past on account of various factors like huge outsourcing opportunities, R&D thrust and industry consolidation. However, our view is that of caution. Even bigger players like Ranbaxy and Dr. Reddy with a relatively strong balance sheet are finding it difficult on the R&D front. Outsourcing offers significant growth prospects in the long-term. But whether all companies will benefit from this trend remains an area of doubt (look at the software sector).

On the other hand, stocks in the top five losers in the BSE 'A' group is hardly surprising. Shree Rama Multitech, Pentamedia, DSQ Sofware, Wockhardt Life, Chennai Petro and Silverline. Barring Chennai Petro, none of the other stocks have strong fundamentals to support the rise during the recent rally. With the BSE also taking some action in these speculative counters, the loss has been significant.

Top 5 losers…
CompanyPrice (Sep 1st, 2003)Price (Oct 3rd, 2003)(% change)
Shree Rama Multitech 9 6 -36.5%
Pentamedia 12 8 -28.8%
HFCL 27 21 -22.8%
Silverline 7 6 -21.7%
DSQ Software 10 8 -21.2%

Given this backdrop, one wonders whether the premise of some stocks gaining ground is strong or not.

  1. Are investor's buying a stock because the stock market, as a whole, is showing positive signs? Or,

  2. Are investors buying stocks based on the fact that fundamentals are looking strong?

The latter seem to be a safer option from our perspective. This is important because the risk return profile of stocks have changed when one considers the recent rally. Though the long-term prospects remain promising, probably, it is time to tone down return expectations from equities in the future.


Equitymaster requests your view! Post a comment on "Tone down expectations". Click here!

  

More Views on News

The Gold and Silver Bull Market is Not Over (Fast Profits Daily)

Sep 29, 2020

The last few days have been nerve-racking for bullion traders. Stay calm. The bull market still has a long way to go.

Earned Short Term Capital Gains on Shares? Here's What You Need to Know While Filing ITR (Outside View)

Sep 29, 2020

PersonalFN explains CBDT's clarification regarding scrip wise disclosure in ITR in case of short term capital gain.

This Smallcap is a Must Have Stock in Your Portfolio (Profit Hunter)

Sep 29, 2020

Investing in this smallcap could open doors of huge, long-lasting wealth.

Why the Market May Rally for a Few Days (Fast Profits Daily)

Sep 28, 2020

Why I think the market can rise for the next few days.

My Top Pick for 2021 is Not a Stock. It is Something Much More Powerful (Profit Hunter)

Sep 28, 2020

My top pick for 2021 is something that has helped me and my subscribers beat the stock market by a factor of 2:1.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

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

S&P BSE SENSEX


Sep 29, 2020 (Close)

MARKET STATS