Saturday, 19th July, 2008
Round-Up
Silver lining behind the cloud …
The week gone by was interesting for the Indian markets as after suffering setbacks in the first half, the benchmark indices made a smart recovery during the last two days. The prices of crude oil also showed some signs of cooling off, although the inflationary pressure remained unabated. For the week ended July 18, 2008, the BSE Sensex gained 1.2%, while the NSE Nifty added 1.1%.
Markets to rebound
A peek at the week
On Monday, the markets started on weak note taking negative cues from the global markets. The BSE Sensex tumbled 101 points on very first day of trading. The downhill journey continued on the following day as the markets witnessed selling pressure across the broad and closed in a sea of the red. The BSE Sensex closed 650 points down on Tuesday. There was no respite on Wednesday either. Though the markets opened well above the dotted line, by the end of the session most of the gains had been shed and the indices once again closed in the red.
Last two days of the week witnessed a different mood. The bulls came back fiercely to take on the bears and completely overpowered them. The markets notched up 536 points on Thursday joining the global party to celebrate the lower crude prices. The buoyancy lasted till the last day of the week, enabling the Sensex to close 512 points higher on the final day of trading. A couple of enthusing results announced by index heavyweights aided the investor sentiments. Stocks from the Indian financial sector particularly gained strength from the optimism about the financial behemoths in the US.
Details of institutional activity
On the institutional front, for the week ended July 18, 2008, mutual funds emerged as net buyers to the tune of Rs 0.09 bn, while the FIIs emerged as net sellers to the tune of Rs 2 bn (as per data available).
| (Rs m) |
MFs |
FIIs |
Total |
| 11-Jul |
1199 |
(769) |
430 |
| 14-Jul |
177 |
(526) |
(349) |
| 15-Jul |
(1,082) |
(1687) |
(2,769) |
| 16-Jul |
(315) |
(522) |
(837) |
| 17-Jul |
111 |
1328 |
1,328 |
| Total |
90 |
(2,176) |
(2,086) |
Sectoral scorecard
On the sectoral indices front, the BSE Energy index performed better than the other indices and gained 3.9% this week, while the BSE IT index led the pack of losers, going down by 8.5%.
| Index |
Price on July 11 (Rs) |
Price on July 18 (Rs) |
% Change |
| BSE OIL AND GAS |
8,886 |
9,232 |
3.9% |
| BSE PSU |
5,968 |
6,121 |
2.6% |
| BSE BANKEX |
6,044 |
6,189 |
2.4% |
| BSE AUTO |
3,529 |
3,601 |
2.0% |
| BSE FMCG |
1,987 |
1,996 |
0.4% |
| BSE MIDCAP |
5,365 |
5,239 |
-2.3% |
| BSE HEALTHCARE |
4,130 |
3,991 |
-3.4% |
| BSE SMLCAP |
6,714 |
6,456 |
-3.8% |
| BSE METAL |
12,712 |
11,668 |
-8.2% |
| BSE IT |
3,908 |
3,581 |
-8.4% |
Key stock/sector specific developments during the week
Novartis announced its 1QFY09 results during the week. The company's revenues grew by a decent 11% YoY for 1QFY09 attributed to the strong performances of all its businesses barring OTC. Revenues from the pharmaceutical division (68% of sales) reported 10% YoY growth. The same is more or less in tandem with overall sales. The company attributed this to higher sales of key brands during the quarter. The company's EBDITA margins have expanded by (4.9%) on account of fall in purchase of finished goods and other expenditure (as percentage of sales). The robust performance at the operating level enabled the company to clock an impressive 30% YoY growth in net profits. However, this growth was lower than the 42% YoY growth in operating profits due to a higher tax outgo. While the stock closed 2% higher, its peers GSK Pharma closed 3% lower.
Novartis India Limited 
Top gainers during the week (BSE A)
| Company |
Price on July 11 (Rs) |
Price on July 18 (Rs) |
% Change |
52-Week H/L (Rs) |
| BSE-SENSEX |
13,635.40 |
13,469.85 |
1.20% |
21,207 / 12,514 |
| S&P CNX NIFTY |
4,092.25 |
4,049.00 |
1.10% |
6,357 / 3,790 |
| ING VASYA BANK |
232.7 |
199.3 |
16.80% |
389 / 190 |
| BPCL |
283.95 |
255.35 |
11.20% |
560 / 206 |
| ONGC |
942.6 |
849.25 |
11.00% |
1,387 / 770 |
| MARUTI SUZUKI |
623.75 |
563.85 |
10.60% |
1,252 / 531 |
| IOC |
381 |
344.85 |
10.50% |
810 / 303 |
Axis Bank announced its 1QFY09 results this week. The bank has reported nearly 54% YoY growth in total income, while the net profits witnessed a quantum jump of 89% YoY. Amidst worries of retail delinquencies and derivative losses the bank has reported robust numbers as it has chosen not to concentrate its exposure to any single segment. Besides this, the bank has been altering its asset mix depending upon the industry scenario and its risk appetite. The growth has come in on the back of increased focus on fee income that reported 80% YoY growth and increased lending to companies. While Axis Bank closed higher 3% its peer HDFC Bank ended lower by 3%.
Axis Bank: No ‘slowdown’ impact
IT major, TCS announced its 1QFY09 results. The company's consolidated topline grew by 5% QoQ while its expenditures grew by nearly 9%, translating to a 2.6% drop in operating margins (23.1% in 1QFY09). This drop in margins was mainly on account of higher salary costs along with muted contract pricing. However, the depreciating rupee did help the company post decent margins. At the profit level, the company posted a growth of 4%, largely due to lower depreciation and tax costs. The company recorded a net profit margin of 20.1%, lower by 30 basis points (0.3%) as compared to the previous quarter. During the quarter, TCS added 35 new clients and recruited over 8,900 employees. The company has also declared an interim dividend of Rs 3 per share (dividend yield of 0.4%). The stock ended marginally down this week while is peer Wipro closed 11% down.
TCS: Muted pricing hurts margins
Top losers during the week (BSE A)
| Company |
Price on July 11 (Rs) |
Price on July 18 (Rs) |
% Change |
52-Week H/L (Rs) |
| RANBAXY |
437.45 |
531.45 |
-17.70% |
614 / 300 |
| HCL TECH |
201.1 |
239.05 |
-15.90% |
342 / 180 |
| SATYAM |
382.95 |
444.45 |
-13.80% |
544 / 305 |
| WIPRO |
365.55 |
412.3 |
-11.30% |
552 / 325 |
| CHAMBAL FERT |
60 |
66.9 |
-10.30% |
96 / 32 |
Parting thoughts
With the markets registering a modest gain after having declined incessantly in the past sessions, now is perhaps the right time to have a re-look at one’s attitude towards stock markets. Warren Buffett’s letter to shareholders in 1991 points out “ Think about long-term business prospects rather than short-term stock market prospects, a perspective likely to improve results. It's true, of course, that, in the long run, the scoreboard for investment decisions is market price. But prices will be determined by future earnings. In investing, just as in baseball, to put runs on the scoreboard one must watch the playing field, not the scoreboard.”
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