To 18,000 and back!

Wed, 7 Apr Closing

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After flirting briefly with the psychologically crucial mark of 18,000 on the Sensex, the indices made a hasty retreat and closed marginally above breakeven for the day. Thus, while Sensex closed with gains in the region of 30 points, NSE Nifty edged higher by around 10 points. BSE Midcap and BSE Small cap indices were also amongst the gainers, edging higher by around 0.5% and 0.7% respectively. Three stocks gained for every two that declined on the Sensex today. Heavyweights like ITC, Reliance and Bharti Airtel contributed the most to the advances made by the Sensex today.

Buoyancy was also witnessed amongst Asian indices as most of them closed the day in the green. Europe however is trading mixed currently. The rupee was seen trading Rs 44.5 to the dollar at the time of writing.

The Indian stock markets seem to be in some sort of a sweet spot currently. While the long term domestic story continues to remain strong, the FIIs are back to their splurging ways what with more and more of them wanting to be a part of the India growth story. The fact that the global markets are a picture of calm right now also seems to be helping matters. It is at times such as these that there is a tendency amongst investors to get complacent and go overboard. Hence, it would help if one takes into account the growth that the underlying stock seems to be pricing in at the current valuations. If it is a good deal greater than what the historical performance suggests, caution needs to be exercised. After all, even the best stocks can go nowhere for years if growth for many years to come is already priced into them.

Tata Motors, the homegrown automotive major traded strong today and closed with gains of a little under 3%. The company, which looked out of sorts a few months back on account of a bloated debt profile and below par M&HCV sales, seems to have turned the corner of late. Not only has it managed to reduce some of its debt by converting it into equity and resorting to stake sale in subsidiaries, overall volumes have also come in pretty good for the company. Infact, volumes have come in so strong over the past few months that the company's commercial vehicles and passenger vehicles divisions have both posted record sales for the fiscal. However, exports have come in higher by just 2% over the corresponding previous fiscal. Furthermore, with overall debt levels still ruling at uncomfortable levels, the company does need a few more quarters of solid growth in its domestic markets so that strong cash flows from the same could be used to pay down excess debt. Looking at the way the Indian market is growing, that may not be a very difficult proposition indeed.

With a decline in the region of 2%, FMCG behemoth HUL yet again ended on the losers' side. Infact, the stock has now become a pretty regular feature on the losers list amongst the index stocks. What more, it is also trading pretty close to its 52-week lows. This at a time when most of the index constituents are flirting with their 52-week high levels. The reason behind the company's poor performance seems to have been the ongoing price war in the detergents space with its arch rival P&G. The war though is currently showing no signs of abatement. Furthermore, it has also come up with some pretty intense competition in its other segments as well. Coupled with these issues is the issue of the company's size. For any sort of growth to happen, the company will require a block buster product, which given the competitive environment, will be hard to come by. However, we should not forget that the company has got some pretty strong brands in its portfolio and given its distribution reach, it would be premature to write the stock off completely.