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.
Demolition men! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 29, 2005

    Demolition men!

    At the current juncture, these would be the best words to describe Foreign Institutional Investors (FIIs) who have been selling equities, not just in India but also across the globe, consequently leading to the demolition of positive investor sentiments and eroding investors' wealth by the hour. The Indian indices continued their downward spiral this week also, amidst heavy unloading by FIIs. The benchmark indices lost about 5% each, with selling witnessed across sectors. Though domestic mutual funds lent support, they seemed feeble in front of the FII might. Thus, post this week's loss, the BSE-Sensex has lost about 13% within a month from its lifetime highs!

    The turmoil on the bourses continued this week also, with the markets losing significant ground again this week. Markets began Monday on a feeble footing and proceeded to trade lower, as profit booking continued unabated throughout the trading session, though short bouts of intermediate buying were witnessed. This tug-of-war between the bulls and the bears continued well into Tuesday and Wednesday's trade, when every rise, sometimes marginal, was countered with fresh intensified selling. Nonetheless, while Tuesday saw the markets gain some ground, the trend reversed Wednesday onwards. However, Thursday and Friday clearly belonged to the bears, as the bulls capitulated in the face of massive profit booking across the board, with the Sensex losing almost 300-points in these two trading sessions. Thus, at the end of the carnage, the benchmark indices had lost about 5% each. The mid-cap and small-cap indices lost about 4%. It must be noted that the F&O settlement on Thursday played a critical role in this week's market behaviour.

    As is now common knowledge, the men carrying out this demolition drive since the last few weeks have been none other than the FIIs. While our domestic mutual funds (MFs) managers have been buying, sometimes in large chunks, at every correction, as mentioned above, their might is not enough to prevent the downslide. To put this into perspective, since post the day when the Sensex hit its lifetime high (October 5, 2005), while FIIs have been net sellers to the tune of Rs 38 bn (approx US$ 850 m), domestic MFs have bought Rs 25 bn (approx US$ 560 m) worth of equity. One of the reasons explaining this sudden outflow of money has been the sharp depreciation of the rupee in the month of October 2005 (about 2.7%), which is in sharp contrast to the trend witnessed over the previous several months, which saw the rupee appreciate about 7% against the US$.

    Top gainers over the week (NSE-50)
    Company Price on
    Oct 21 (Rs)
    Price on
    Oct 28 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE-SENSEX 8,069 7,686 -4.8% 8,822 / 5,649
    S&P CNX NIFTY 2,444 2,316 -5.2% 2,669 / 1,777
    TATA CHEM 178 182 2.2% 211 / 125
    GLAXO 855 874 2.2% 925 / 639
    HDFC 924 939 1.7% 1,081 / 624
    L&T 1,326 1,344 1.4% 1,599 / 798

    Now let us consider some sector/stock specific developments this week:

    • Bharti Tele, India's leading cellular services provider, reported yet another quarter of strong performance. On the back of a robust growth in GSM subscriber base, the company has reported strong growth in both the topline (up 44% YoY) and the bottomline (up 73% YoY) during the quarter. Bharti crossed the 14 m-customer mark for its mobile services in September 2005 and has cornered a share of 27.7% of the all-India GSM subscriber base. The stock ended the week relatively strong, down only 0.5%, as the stock shot into considerable limelight on Friday on the back of the news that global telecom major, Vodafone Group Plc. has picked up a near 10% stake in the company. Telecom stocks this week/month

    • Cement stocks did not find much favour, despite the news that cement prices are expected to rise by Rs 5 to Rs 7 per bag in the current quarter on the back of strong demand from domestic as well as overseas markets. Cement dispatches have been growing across the country steadily over the past few quarters, due to high infrastructure activity and higher exports to Gulf regions. In the southern markets, demand has been high due to the housing sector boom clubbed with IT infrastructure projects. However, it must be noted that raw material prices have been increasing due to rise in prices of limestone and coal, which could be one of the reasons for the price increase. Cement stocks this week/month

      Top losers over the week (NSE-50)
      Company Price on
      Oct 21 (Rs)
      Price on
      Oct 28 (Rs)
      %
      Change
      52-Week
      H/L (Rs)
      VSNL 318 273 -14.1% 445 / 161
      NALCO 176 153 -12.9% 209 / 139
      GAIL 258 232 -10.2% 287 / 194
      TATA MOTORS 513 462 -10.0% 577 / 400
      TATA STEEL 367 331 -10.0% 456 / 285

    • M&M, India's largest tractor maker, is slated to acquire 100% of Romania's largest tractor company, Tractorul SA Brasov. The attraction that Tractorul offers is that it serves as a gateway to the EU market, with Romania becoming an EU member country. As regards M&M, this move is in line with its declared strategy of making Mahindra Systems & Automotive Technologies (MSAT) a billion-dollar company. The stock ended the week lower by 3% in line with overall weak market sentiments. Auto stocks this week/month

    • Indian pharmaceutical companies, in order to strengthen their position in the global arena, are scaling up their R&D activities. Among the major recruiters are Ranbaxy, Wockhardt and Sun Pharma. Companies are focusing on new chemical entities, generic variants of existing drugs and new drug delivery systems. Also, contract research is on the upswing. International drug majors like Teva, Ivax and Pliva are also availing services from India due to our cost advantage and reverse engineering skills to develop off-patent drugs. This is a big positive for the industry as a whole as from January 1 2005, the product patent regime has come into force. Pharma stock this week/month

    Going forward, with the key India Inc. results now out of the way, investors would get back to their number crunching game and re-focus on the future of these companies. While the current market valuations of 13 times one-year forward earnings does not seem too expensive, the challenge for India Inc. to deliver from hereon would stand increased, considering a scenario of hardening interest rates and stronger fuel prices. However, we continue to believe that the India story is not over and staggered investments with 3 to 5 years investment horizon is a sound approach to mitigate the impact of most risks. We feel that fundamentals do not change by the day, week or month. If the fundamentals and performance of the company are strong, markets will acknowledge the same in due course of time. Happy and safe investing!

     

     

    Equitymaster requests your view! Post a comment on "Demolition men!". 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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    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.

    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