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.
Where do you go? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 18, 2004

    Where do you go?

    The week gone by saw the Indian stock markets ‘zoom’ across their all-time high levels as the Sensex crossed the 6,400 barrier, only to decline sharply on the final day of trading. After the weakness that was witnessed during the previous week, this week marked a return to ‘euphoric activity’ as both the benchmark indices, the Sensex and the Nifty, moved towards their all-time high levels. However, after gaining by 3.0% during the first four days, profit booking led the markets to fall by 1.2% on Friday. While there was buying witnessed across select sectors like energy and banking, others like software and FMCG witnessed a sedate journey throughout the week.

    After a dull close to the week ended December 10, the markets opened strongly on Monday and continued to build up gains as the week progressed. Wednesday saw the highest gains of the week as the Sensex crossed the critical 6,400 barrier. However, after maintaining the upward momentum on Thursday, Friday saw profit booking across a range of sectors.

    Key gainers over the week (NSE-50)
    Company Price on
    Dec 10 (Rs)
    Price on
    Dec 17 (Rs)
    H/L (Rs)
    BSE-SENSEX 6,234 6,346 1.8% 6,437 / 4,228
    S&P CNX NIFTY 1,969 2,012 2.2% 2,039 / 1,292
    ZEE TELE 158 174 9.8% 189 / 100
    SUN PHARMA 495 534 8.0% 555 / 278
    ABB 884 953 7.8% 975 / 491
    SAIL 54 58 7.1% 59 / 21
    GRASIM 1,192 1,270 6.5% 1,317 / 840

    Now considering some stock specific action on the bourses, media major Zee Tele led the gainers’ pack this week. This seemed a result of the recent announcements with respect to hike in cable charges, which is expected to benefit the company on a consolidated basis. The incremental revenues from the hike in prices will directly filter into the bottomline, as cost of the cable remains the same. Deliberation with regard to the existing DTH policy (direct to home) is also an opportunity for the company. Gains in the pharma major, Sun Pharma, were on account of reports that the company is planning acquisition of a small company in the US. The recently issued US$ 350 m FCCB issue is likely to be used to fund the same.

    Coming on to the losers’ list, Reliance ‘maintained’ its lead this week as well and lost over 3.7% over its last week’s closing levels. While much has already been said about the implications of the current imbroglio created by the owners of the Group, we would like to mention here that the Group, as a whole, benefits from synergies and that the outcome of the current situation will have a lingering effect on the way things pan out of the group companies in the future. Losses in the banking behemoth, SBI, seemed a result of profit booking after the stock had run up rapidly on account of aggressive buying by the FIIs as foreign investment in the company had declined to 18%, below the RBI limit of 20%.

    Key losers over the week (NSE-50)
    Company Price on
    Dec 10 (Rs)
    Price on
    Dec 17 (Rs)
    H/L (Rs)
    RELIANCE 499 481 -3.7% 650 / 382
    DABUR 86 84 -2.0% 98 / 60
    OBC 324 317 -2.0% 367 / 149
    SBI 595 583 -2.0% 690 / 390
    SHIPPING CORPN. 179 177 -1.3% 203 / 61

    Coming back to the present state of the Indian markets, the very fact that they have breached their all-time highs requires investors to practice utmost caution with respect to their equity investment decisions. Further, with interest rates on the rise, stocks, especially from industries that are capital intensive and have a high debt to equity ratio should be avoided. While we are not trying to take the role of a 'doomsayer', we are concerned about is the fact that markets are seemingly not taking into consideration the various risks that cloud the horizon. For instance, one of the biggest factors that are helping Indian markets currently is the incessant flow of FII money.

    At the current levels, the Nifty is trading at a price to earnings of 15 times FY04 EPS and around 13 times FY06 EPS (assuming an average earning growth of 15% for Nifty companies in the next one year). These are high levels, at least from the medium term perspective. However, there are still some good stocks that are attractive from the long-term (2 to 3 years) perspective. Rather than going all out in the markets believing that all kinds (!) of stocks will benefit from the upward momentum, investors need to follow a selective and a staggered approach to investing. Remember, risks for the short term are very high at these levels!



    Equitymaster requests your view! Post a comment on "Where do you go?". 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.

    Mr Trump Has Been Broken (Vivek Kaul's Diary)

    Aug 24, 2017

    Kelly, Mattis, McMaster, Cohn, and Mnuchin are in charge. But these Pentagon bureaucrats and Wall Street hustlers may be worse than a loose-cannon president.

    Were You Lured By Mr Market's Bait? (The 5 Minute Wrapup)

    Aug 23, 2017

    Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?

    Deep State First (Vivek Kaul's Diary)

    Aug 23, 2017

    Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.

    Why Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    More Views on News

    Most Popular

    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.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    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 24, 2017 10:50 AM