Dec 8, 2007|
Tottering at the top...
Indian markets alternated between weak closings and strong comebacks throughout the week, with sectors whirling in and out of favour. Three out of the five sessions during the week ended in the green as Foreign Institutional Investors (FIIs) turned out to be net buyers. Thus, for the week ended December 7, 2007, the BSE-Sensex gained 3.1% while the NSE-Nifty gained 3.7%
The week began on a positive note, with the Sensex gaining 240 points and the Nifty gaining 102 points on Monday. Tuesday witnessed a reversal of sentiments as selling pressure in banking, software and telecom stocks caused the indices to close in the red. The Sensex shed 74 points, while the Nifty lost 7 points. Stocks from the energy sector turned back the tables on Wednesday, as the Sensex closed 209 points higher while the Nifty gained 82 points. Despite a firm start and strength across global markets on Thursday, the Indian indices failed to retain the momentum as occasional bouts of profit booking took a toll on the index heavyweights. Select telecom and banking stocks were in favour while selling was witnessed in commodity, auto and pharma stocks. The Sensex closed 58 points higher while the Nifty gained 15 points. After opening to a firm start on Friday on the back of global cues, the benchmark indices failed to sustain the momentum as sporadic attempts of profit booking dragged them below the 20K mark. The Sensex closed at 19,966 (up 170 points) while the NSE Nifty closed at 5,974 (up 20 points).
On the institutional activity front, between 30th November and 6th December, FIIs were net buyers to the tune of Rs 35 bn, while mutual funds bought equities worth Rs 9 bn.
On the sectoral indices front, BSE SMLCAP (8%), BSE METAL (6%) and BSE MIDCAP (6%) featured among the key gainers.
||As on November 30
||As on December 07
|BSE OIL AND GAS
Now let us have a look at some of the key stock/sector specific developments during the week.
As per a leading business daily, SAIL is planning to invest Rs 120 to 150 bn over the next five years to upgrade technology and to increase the current production capacity. There is cost overrun by the company from earlier estimate of Rs 490 bn. The company has lined up major expansion of capacity of hot metal by 26 m tonnes (MT) in 2012 in their revised corporate plan as against 22 MT planned earlier. The company plans to fund its revised Rs 530 bn modernisation and expansion programme through a mix of internal accruals and proposed 1:1 debt equity ratio. To raise funds, the company is also evaluating other option such as dilution of government stake, if need be. The stock of SAIL closed higher by 6%, while its peer Tata Steel (up 1%) also found favour.
As per a leading business daily, the government is considering a relaxation of the 5,000-hectare cap on the land size of special economic zones once the new relief and rehabilitation policy and the proposed amendments to the Land Acquisition Act are put in place. It maybe noted that RIL was planning a 10,000-hectare zone in Jhajjar, Haryana while DLF had proposed an 8,000-hectare zone in Gurgaon, Haryana. The ceiling was enforced against the backdrop of widespread protests and violence at Nandigram, West Bengal and Panvel, Maharashtra. This is a positive development for RIL and DLF as key infrastructure components like airports and ports need land size much in excess of 5,000 hectares. The stock of RIL was closed flat while its peer DLF closed 7% higher.
As per a leading business daily, ONGC Videsh (OVL), the foreign arm of ONGC, is considering to enter into a JV with the Hinduja group for 50% stake in the massive South Pars gas fields and the Azadegan oil fields in Iran. The other 50% stake will be held by a subsidiary of the National Iranian Oil Company. Although much depends on the terms of the agreement and modalities thereafter, this would be a significant development for ONGC as South Pars is the largest offshore gas field in the world while Azadegan is one of the biggest oil finds in the last 30 years. The stock of ONGC closed 2% higher, while its peer RIL closed flat.
November 30 (Rs)
December 07 (Rs)
||590 / 392
||4,074 / 1,927
|ING VYSYA BANK
||340 / 149
||460 / 251
||285 / 176
With the Sensex swinging between gains and losses on a daily basis, investors with a focus on business fundamentals are left wondering. We refer to what Warren Buffett mentioned his 1983 letter to shareholders, "People who buy for non-value reasons are likely to sell for non-value reasons. Their presence in the picture will accentuate erratic price swings unrelated to underlying business developments." Even if prices go all over the place due to non-value reasons, dear readers, we urge you to stick to value reasons. As Mr. Buffett mentions in his 1985 letter, "Wild swings in market prices far above and below business value do not change the final gains for owners in aggregate; in the end, investor gains must equal business gains."
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