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Will the run continue… - Views on News from Equitymaster
 
 
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  • Dec 2, 2000

    Will the run continue…

    The week started on a positive note with the benchmark index, BSE, rallying 104 points. The hint of an end to the U.S presidential saga, with a Bush victory in sight, buoyed global markets leading to a domino effect on the Indian bourses.

    The telecom, media and technology (TMT) counters continued to sail in turbulent waters. These counters remain under the spotlight, as the market watch on with a scathing eye. Infosys, Wipro, Satyam and VisaulSoft have all reported strong growth rates for the last two consecutive quarters (1QFY01 & 2QFY01). Average earnings growth for these companies in this period was 116.5%, however, the valuations refuse to budge with the average earnings multiple a little more than half at 61x.

    Markets, it seems, have not forgotten their burns of the March meltdown, consequently, following the adage 'once bitten twice shy'. They continue to remain nervous over the sustainability of these screeching growth rates. Further, bigger brother, NASDAQ, has not helped the situation. In fact, it is leading the pack on the reality check. There are, however, indications of the Indian bourses and the NASDAQ de-linking from each other. Yesterday was a good example with the BSE Sensex gaining 34 points despite the NASDAQ sliding 109 points on Thursday. These are positive signs and maybe we should now start questioning whether we need to continue with the reality check?

    Cement continued to remain buoyant as positive news flowed into the markets. Cement dispatches were up for the month of October. Further, prices have been on the rise as cement companies cut back on production. However, the industry is in for some trouble with the Department of Company Affairs and Monopolies and Restrictive Trade Practices Commission launching an investigation into the current production cut backs and subsequent price hikes. The threat of indictment will lay a heavy hand making any further rally more burdensome.

    Towards the end of the week, markets saw more money flowing into the defensive sectors namely, pharma and FMCG. Whether the shift is an indication of the tougher times to come or it is due to the attractiveness of these stocks is too early to call. During the week, the BSE Senex gained 4.2 percent and the Nifty gained 4.1 percent.

     

     

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