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Sliding from the peak... - Views on News from Equitymaster
 
 
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  • Dec 22, 2007

    Sliding from the peak...

    The Sensex fell from the 20,000 peak during the week as the Indian markets felt the global market jitters. Two out of the four sessions during the holiday-shortened week ended in the red but were much larger in terms of magnitude vis-a-vis the gains posted. Thus, for the week ended December 20, 2007, the BSE-Sensex lost 4.7% while the NSE-Nifty lost 4.8%

    The week began on a depressed note, with the Sensex losing 750 points and the Nifty shedding 271 points on Monday. With no news of huge negative implications coming out of the Indian markets, the decline could largely be attributed to global news, particularly the ones emanating from the US markets. Worried by rising inflation, the US markets plunged and the markets from other parts of the globe, India included, followed suit. While weak sentiments across global markets, particularly the ones emanating from the US markets continued to act as dampeners on Tuesday, investors also worried about the impact of the oil prices and rupee dollar rates on the corporate earnings in the forthcoming results season. Consequently, the Sensex lost another 182 points while the Nifty was down 35 points.

    The markets opened strongly on Wednesday. However, by the time of closing, they barely managed to keep afloat. Heavyweights from the energy sector provided some relief as the Sensex closed 12 points higher while the NSE chalked up a 9 point gain. Software stocks emerged as the key gainers on Thursday as the Sensex closed at 19,163 (up 71 points) while the Nifty closed at 5,767 (up 15 points).

    On the institutional activity front, between 14th and 19th December, while Foreign Institutional Investors (FIIs) emerged as net sellers to the tune of Rs 42 bn, mutual funds bought equities worth Rs 870 m.

    (Rs m) MFs FIIs Total
    14-Dec (2,189) 4,075 1,886
    17-Dec (1,990) (10,987) (12,977)
    18-Dec 3,813 (24,498) (20,685)
    19-Dec 1,236 (10,925) (9,689)
    Total 870 (42,335) (41,465)

    On the sectoral indices front, BSE IT Index (up 1%) was the only gainer, while the BSE Metal Index was the top loser (down 8%).

    Index As on December 14 As on December 20 % Change
    BSE IT 4,260 4,321 1.4%
    BSE HEALTHCARE 4,308 4,243 -1.5%
    BSE FMCG 2,264 2,198 -2.9%
    BSE SMLCAP 12,196 11,813 -3.1%
    BSE AUTO 5,744 5,541 -3.5%
    BSE MIDCAP 9,472 9,026 -4.7%
    BSE BANKEX 11,335 10,739 -5.3%
    BSE PSU 10,079 9,513 -5.6%
    BSE OIL AND GAS 12,981 12,246 -5.7%
    BSE METAL 19,763 18,273 -7.5%

    Now let us have a look at some of the key stock/sector specific developments during the week.

    As per a leading business daily, roadshows for New Exploration and Licensing Policy (NELP) VII have been planned in Mumbai, London, Houston, Calgary, Singapore and Perth. The geo-scientific data has been made available online and data centers have been established at Delhi, London, Houston, Perth and Calgary. RIL plans to bid jointly with BP, Exxon Mobil and Chevron while ONGC is also looking at US oil majors for joint bids. It maybe noted that India is keen on the participation of Chevron, BP and Exxon Mobil, as domestic companies do not possess the requisite deep-water technology. India is up against Africa and South America in attracting the US oil majors.

    As per a leading business daily, roadshows for New Exploration and Licensing Policy (NELP) VII have been planned in Mumbai, London, Houston, Calgary, Singapore and Perth. The geo-scientific data has been made available online and data centers have been established at Delhi, London, Houston, Perth and Calgary. RIL plans to bid jointly with BP, Exxon Mobil and Chevron while ONGC is also looking at US oil majors for joint bids. It maybe noted that India is keen on the participation of Chevron, BP and Exxon Mobil, as domestic companies do not possess the requisite deep-water technology. India is up against Africa and South America in attracting the US oil majors. ONGC (down 3%) and RIL (down 4%) led the pack of losers from the energy pack for the week.

    As per a leading business daily, India's largest banking entity, SBI, is planning to introduce a voluntary retirement scheme (VRS) for its subordinate staff in FY08. The proposed scheme aims to give chance to over 40,000 employees, who find it challenging to work in a computerised environment and competitive market conditions. The bank has clarified that this is because the nature of work has changed substantially due to introduction of core banking solutions (CBS) and automation. Besides, the work demands on staff are growing enormously to retain market share. SBI's total employee base is around 2,00,000 (including that of its associates). The actual amount payable to employees opting for VRS will be determined by taking into account their number of years of service and the remaining period. The scheme is expected to be benign for the bank's efficiency parameters over the longer term. Banking stocks closed weak with PNB (down 9%) and SBI (down 5%) featuring among the key losers.

    Top gainers during the week (BSE A)
    Company Price on
    December 13 (Rs)
    Price on
    December 20 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    BSE SENSEX 20,104 19,163 -4.7% 20,498 / 12,316
    S&P CNX NIFTY 6,058 5,767 -4.8% 6,185 / 3,555
    THOMAS COOK INDIA 76 121 58.8% 144 / 46
    GILLETTE INDIA 1,103 1,440 30.5% 1,525 / 762
    GUJ.IND.POW 111 130 17.2% 134 / 54
    MASTEK 296 335 13.1% 419 / 242
    NOVARTIS 360 386 7.3% 431 / 269

    Jyothy Laboratories (JLL) made its debut on the bourses during the week. The company listed at Rs 799 giving a modest listing premium of 15.8% to investors. JLL is an FMCG company in the fabric care, household insecticide, surface cleaning, personal care and air care segments. The company's leading brands are Ujala, Maxo, Exo, Jeeva and Maya. Ujala (fabric whitener) and Maxo (mosquito repellent coils) occupy leading positions and have market shares of 68.5% and 20.5% (value terms) in their respective product segments for the month ended March 2007. The branded products of the company are present throughout urban and rural India. JLL has established a distribution network across India with a sales staff of over 1,500 people servicing approximately 2,500 distributors. Its peer, HUL closed marginally higher for the week.

    Top losers during the week (BSE A)
    Company Price on
    December 13 (Rs)
    Price on
    December 20 (Rs)
    %
    Change
    52-Week
    H/L (Rs)
    DREDGING CORP 1,178 1,012 -14.1% 1,070 / 1,008
    JINDAL STEEL 15,908 13,805 -13.2% 14,092 / 13,500
    HDFC 3,137 2,725 -13.2% 2,800 / 2,701
    MRF LTD. 7,933 6,947 -12.4% 7,200 / 6,881
    HINDUJA TMT 680 605 -11.0% 608 / 587

    With the Sensex playing merry-go-round around the 19K level, it is worthwhile to remind ourselves of what Warren Buffett mentions in his 1981 letter to shareholders. He says "While market values track business values quite well over long periods, in any given year, the relationship can gyrate capriciously." Not only are the Indian markets gyrating wildly, the period has shrunk from "within a year" to "within weeks". As always, dear reader, we urge you to step back and concentrate on the underlying businesses.

     

     

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