Sunday, 11 November 2007

Bulls fail to stir some bluechips

The stock market is breathing octane these days. The Sensex has clocked new records as the indices attained new heights, but amidst the fireworks there still exist some losers — which remained untouched by the great euphoria witnessed in the Indian stock markets over the last 20 months.

Yes, you are right. We are talking about the laggards who remained bearish even as the bull raced ahead on Dalal Street from February 8, 2006 when Sensex for the first time touched 10K to October 29, 2007 when it touched the historic figure of 20K.

The majors from the BSE 100 which ended up gasping during the period include Hindustan Petroleum (HPCL, -23% ), Glaxosmithkline Pharmaceuticals (-19%), Hero Honda Motors (-16%), Cipla (-14%), Bharat Forge (-13%), Indian Oil Corporation (- 13%), Patni Computer Systems (-11%), Tata Tea (-3%) and Bharat Petroleum Corporation Limited (-2%).

Analysts believe that there isn’t just a singular justification for why they didn’t click when every other companies set the Sensex ablaze. But yes, they’ve been left far behind in the marathon rally at Dalal street. SundayET takes a snapshot of the top laggards during the great Indian stock run.

The following are some of the bluechip companies that didn’t get impacted by the bull run. Hindustan Petroleum Corporation: It is not surprising that HPCL figures at the top of the list, dipping by 23% in that time period. The petroleum sector has always been at the mercy of government policies, which is primarily the reason for its downfall.

“Ever since the disinvestment of these stocks backfired four years back, they were never part of the Sensex rally. Crude prices going over the roof didn’t help much either. The oil marketing companies are falling on the fundamentals too, which don’t look very rosy,” says Ashu Madan, national head, Religare, a broking company. Another reason for the underperformance was the lower subsidy provisioning.

Glaxosmithkline Pharmaceuticals: Next on the list comes Glaxosmithkline, which declined by 19% in the same period. Research analysts believe that the pharma sector has been traditionally lying low and its hey days are still to come. “Globally, the pharma sector has been underperforming. So, it doesn’t comes as a surprise that Glaxosmithkline hasn’t done well. Another reason for lagging behind is the strengthening rupee, since their profits are directly related to it,” says Shriram Iyer, head of research, Edelweiss Capital.

Source: Economic Times

Shares set to rise further in 2008: JPMorgan

Stock markets in India are expected to rise further next year but at a slower pace as high valuations and a fall in corporate profit growth limit gains, analysts at JPMorgan said. The Mumbai market's benchmark index is expected to rise to 22,500 points by the end of next year, up 16 per cent from Tuesday's close of 19,400.67.

The index has gained nearly 15 per cent in October, its biggest monthly gain in almost four years, taking its rise this year to 40 per cent. It had gained 47 per cent last year and 42 per cent in 2005.

Bharat Iyer, head of research at JPMorgan in India, said corporate profits, which had grown 25-30 a year for the past three years, would slow from a high base.

"You have challenges in the form of rupee appreciation, volatility in interest rates, etc. So you expect earnings growth to structurally slow down.

"It's still very attractive in absolute terms at 19-20 percent, but the fact of the matter is that you are coming down from 30 percent to 19-20 per cent, which is a step down."

He said infrastructure, engineering and construction and steel sectors were likely to perform well, while drug makers and telecoms were not expected to be as strong as they have been.

Source: Economic Times

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.