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.
A cracker of a week! - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 3, 2005

    A cracker of a week!

    What better way could have Indian investors enjoyed their Diwali? The Indian bourses were on fire this week as the benchmark indices staged a smart rally in the holiday shortened week, Thursday and Friday being holidays. While the BSE-Sensex gained 5% (387-points) in the three trading sessions during the week, the NSE-Nifty notched gains of 4.4%. However, the buying this week was not concentrated only towards the large-caps as the mid-cap and small-cap indices also ended the week about 4% higher.

    Bulls were back with a vengeance on the Indian bourses. Riding high on the back of strong global cues as Asian markets were on a winning spree in the first three trading sessions of the week, the bulls descended heavily on the bears who were forced to run for cover. All round buying across sectors/stocks characterized the market this week, which helped the benchmark indices notch such strong gains. This week’s gains must have come as great relief for investors, who had been facing bad times with the Sensex collapsing by over 1,000-points within a month. It must be noted that this was on account of FIIs have been selling equities all throughout the month of October (Rs 38 bn). However, the gains this week seem to have been supported by non-institutional investors as well as while the FIIs have been net sellers to the tune of Rs 1 bn in the first two trading sessions, domestic MFs have bought less than Rs 3 bn.

    Key gainers over the week (BSE-30)
    COMPANY Price on Oct 28 (Rs) Price on Nov 02 (Rs) % CHANGE 52-WEEK H/L (Rs)
    BSE-SENSEX 7,686 8,073 5.0% 8,822 / 5,713
    S&P CNX NIFTY 2,316 2,419 4.4% 2,669 / 1,798
    L&T 1,343 1,510 12.4% 1,578 / 815
    NALCO 153 170 10.7% 209 / 135
    GUJ. AMBUJA 68 73 8.0% 79 / 46
    DR. REDDY 791 847 7.0% 975 / 613
    MTNL 112 119 6.6% 170 / 108

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

    • Nalco and Gujarat Ambuja were amongst the key gainers in the Sensex this week (3 trading sessions) as can be seen in the table above. The optimism towards these during the week, apart from the general market optimism, was the news of product price hikes in the respective sectors. While Nalco has announced a price hike in aluminium by about 3% to 4%, cement prices in the Western region of the country are slated to rise Rs 5 per 50 kgs bag. It must be noted that since both these industries (and also steel) have high operating leverage, any improvement in realizations flows directly to the bottomline. Staying with commodities, steel prices have been reduced by Rs 500 per tonne, in wake of lower global steel prices, which is a negative for all steel players and worsens the already weakening realizations scenario for the sector.

    • Dr.Reddy's was another big gainer this week. The stock has been in the limelight ever since it reported strong September quarter numbers. On a consolidated basis, the topline has registered a 7% YoY growth. Revenue growth was driven by strong performances from all the businesses except North American generics, which continued to witness intense competition and price erosion. The major improvement came at the operating level, which saw operating margins expand from 13% in 2QFY05 to 23% in 2QFY06. The major reason for the same was a drastic reduction in R&D expenditure as a percentage of sales on account of the deal signed with ICICI Venture. As per the deal, the latter will fund the ANDAs filed by Dr.Reddy's for FY06. This significant margin expansion percolated down to the bottomline (up 94% YoY).

    • MTNL too gained about 7% this week. The optimism towards the stock was seemingly on the back of the news that the Department of Telecommunication (DoT) is contemplating the option of a quasi-merger of the company with BSNL. This would basically lead to the creation of four regional wireline companies out of BSNL wherein its wireline operations in the North would be merged with that of MTNL's Delhi operations and the West would see it merging with MTNL's Mumbai operations. All mobile operations of both the entities would be transferred to a separate company. It must be noted that we believe that such an arrangement would not be of great benefit to MTNL. However, considering the fact that despite MTNL having not performed upto market expectations in recent times, which is adequately reflected in its stock valuations, we believe that the stock price does not reflect the true value of the 'business', which could come to the fore if such an arrangement were to happen.

      Key losers over the week (BSE-30)
      COMPANY Price on Oct 28 (Rs) Price on Nov 02 (Rs) % CHANGE 52-WEEK H/L (Rs)
      HPCL 307 299 -2.4% 417 / 283
      BPCL 380 377 -0.8% 475 / 340
      RANBAXY 352 352 -0.1% 650 / 340
      BHARTI TELE 329 329 0.0% 367 / 156

    • BPCL, the oil refining and marketing player, was amongst the few index losers this week. The stock remained out of favour seemingly owing to its poor 2QFY06 results. Despite a healthy 21% YoY growth in topline led by increase in demand of aviation fuel, naphtha and lubricants, the company reported a net loss of Rs 2 bn in 2QFY06 on account of a an operating loss. This appeared to be a fall-out of the arbitrary government policy of raising prices at the retail level. Similarly, a lower other income also affected the bottomline.

    Going forward, with investors already feeling the heat considering the huge volatility being witnessed on the bourses, we would advise investors to take a long-term approach while investing. While investment in equities was never risk-free, this is compensated for by the higher returns. The risks can surely be mitigated to a large extent by following a disciplined, staggered and fundamental investment approach, which is an optimum strategy, especially for a retail investor, for whom, preservation of capital is as much important as earning decent returns on the same. We continue to believe that the India story is not over and staggered bottom-up investments with 3 to 5 years investment horizon is a sound approach. Happy and safe investing!



    Equitymaster requests your view! Post a comment on "A cracker of a week!". 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.

    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.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    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...

    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


    Aug 18, 2017 10:52 AM