• MARCH 14, 2003

Opportunity in disguise...

The losing spree on the indices continued into the third week, with the Sensex losing 1.4% and the Nifty losing 1.7% this week. US-Iraq situation continued to be the key reason for investors globally to exit equities. Going by what’s happened till date, the Baghdad worries are unlikely to wane anytime soon.

This week only 4 stocks gained on the benchmark NSE Nifty, indicating the extent of pessimism haunting investor sentiment. These were, Nestle, Castrol, MTNL and Hero Honda and not even one stock’s gain was more than 3%. Nestle continued to benefit from its strong numbers in the December quarter and the full year (FY03) performance which was declared last week. The company continues to show strong growth prospects even in these sedate market conditions. The company seems to have replaced Hindustan Lever as the investor’s choice in times of uncertainty.

Hero Honda gained marginally on expectations that Honda may be looking at extending its tie-up with the company beyond FY05. Some rumours even suggest that the Japanese major may be looking at a more long-term tie-up with Hero Honda.

Out of the top 25 losers on the Nifty, 4 belonged to technology, 4 came from cement, 4 were PSUs, 3 from power and related industries, 2 FMCG and 2 financial institutions. This gives an indication of how widespread the Baghdad malaise has been. And the bad news is that the crisis is still far from over. So more market nervousness and high crude prices are likely to be the hallmark going forward (atleast in the near term).

But if you are an investor, who’s looking to build an equity portfolio of quality stocks, now is the time to do it. The current crisis is not going to last for a year or even the next six months. Treat it as a good investment opportunity for long term equity portfolio build up. Statistics indicate that when the markets fell over 4% last week, FIIs put in more than Rs 4.6 bn into Indian equities. This week too, for the first 2 days of the week, the FIIs have been net investors (albeit a marginal Rs 0.4 m) in Indian equities. But as always, pick and choose quality stocks.

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