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Top gainers in November! - Views on News from Equitymaster
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  • Dec 1, 2006

    Top gainers in November!

    Phew! What a month of November we have had. Basking in the aftermath of the 2QFY07 results, indices continued to inch higher and in the process, scaled another lifetime high. For the month, both the NSE-Nifty and the BSE-Sensex gained an impressive 6% each. However, there were quite a few stocks that outperformed the benchmark indices by a fair shot. In this write-up let us have a look at the five Nifty heavyweights that gained the most in the month of November.

    Company Price on Nov 30, 2006 (Rs) Price on Oct 27, 2006 (Rs) % Change 52 Week H/L (Rs)
    BSE Sensex 13,693 12,907 6.1% 13,799/8,769
    S&P CNX Nifty 3,958 3,739 5.8% 3,977/2,596
    Zee Tele 373 304 22.6% 375/147
    SBI 1,315 1,094 20.2% 1,324/685
    Bharti Airtel 633 527 20.0% 680/307
    Gujarat Ambuja 145 121 19.8% 148/70
    ACC 1,129 984 14.8% 1,150/453

    Topping the list of gainers for November 2006 is Zee Telefilms, the media and broadcasting major that has edged higher by 23% during the month. The gains we believe are largely a result of the fact that the company has decided to de-merge its cable businesses and news business into separate companies, which will result into significant unlocking.

    Besides, the long term prospects of the media industry, where Zee is a major player is also promising. With discretionary income on the rise, it is being forecasted that the total size of media and entertainment industry will double from 2005 levels with revenues touching the Rs 750 bn levels by 2010. Television industry in particular is likely to witness strong growth on the back of significant improvement in distribution of satellite channels. Zee, by virtue of being an early entrant and a player with significant toehold in various segments of the industry is likely to be a huge beneficiary of the trend. Little wonder, investors seem to be lapping up the media major.

    As far as next two names on the list are concerned, both, the banking major SBI and India's largest cellular player Bharti, have gained 20% for the month, with SBI edging out Bharti marginally. The banking behemoth was witness to another landmark as the stock touched a 52-week high during the month. SBI is the largest and the oldest public sector bank in the country and while it may have lost market share in terms of total banking assets in recent times, given its balance sheet size, penetration and the possibility of merger with associates, remains a preferred play for the long-term.

    Bharti Airtel, the next name on the list is riding high on the robust subscriber additions being witnessed in the Indian telecom space. With the market growing the fastest in the world, the number of telecom subscribers in India is likely to reach a mind-numbing 250 million at the end of 2007. With cellular telephony likely to emerge as the key growth area, Bharti Airtel, the largest and the most profitable cellular player in the industry should remain on investor radar for quite some time to come. The company recently reported stellar quarterly numbers, thus reposing investor faith. However, the huge network investments have taken a toll on the free cash flow generation of these companies and any slowdown in subscriber addition might put pressure on the capital structure of these companies. Hence one needs to be circumspect and keep a close check on valuation levels.

    Rounding off the list are India's two leading cement players, Gujarat Ambuja and ACC, companies that gained 20% and 15% respectively during the month. While growth in volumes was never in doubt, these companies are beneficiaries of a steep rise in cement prices, which in the western region have increased by as much as 34% YoY during 2QFY07. With cement companies possessing high operating leverage, the increased prices have directly flown into the bottomline of these companies, thus enabling them to register stupendous growth in profits. With demand supply parity still some distance away, prices are likely to remain strong, which will most likely result into still higher profits. However, at current valuation levels, risk reward ratio seems to be skewed in favour of risks as any fall in prices could lead to a huge correction.

    If one compares the current list with the one for the month of October, none of the stocks appear on both the list, indicating that different sectors have been driving the indices at different times. This is a good sign as this indicates the rally has indeed been broad based. While we won't forecast the winners for the next month as this is too short a duration for us to take a call on, in the long term, as mentioned before, a well diversified portfolio is likely to give handsome returns as the foundation is solid enough for fundamentally strong and well managed companies to grow at a robust rate and in the process reward its shareholders.



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