Last hour rebound saves the day

Tue, 4 Sep Closing

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A spurt in buying activity during the closing stages saw indices in the equity market of India jump into the positive territory and thus close the day comfortably in the positive. Thus, while BSE-Sensex edged higher by around 56 points (up 0.32%), gains on the NSE-Nifty came in at around 20 points. BSE Mid Cap and BSE Small Cap indices also closed higher, albeit marginally. Nearly 3 stocks gained for every 2 that closed the day in the negative on the Sensex.

While Asian indices closed mixed today, Europe too is showing a mixed trend currently. Rupee was trading at Rs 55.6 to the dollar at the time of writing.

Today's gains were mostly due to strength in heavyweights like Reliance and State Bank of India (SBI) we believe. The overall sentiment though continues to remain lackluster. There is no firm announcement on further stimulus coming through from the west as well. However, an astute long term value investor should not worry greatly about these factors. As long as a stock is available with sufficient margin of safety from a valuation perspective and has strong fundamentals, it should be bought we believe. Portfolio of such stocks has a much better chance of outperforming in the long run than pinning one's hopes on market timing.

Opto Circuits, one of India's largest manufacturers of medical equipment, closed higher by an impressive 7% today. Important to add that worries over the company's ability to service its debt had earlier taken the company's stock down by around 50% from its 52-week high levels. However, the management has denied any such concerns and has in fact observed that the company's high working capital levels have shown an improvement from the trend witnessed in the recent past. There are no concerns though on the growth front with its first quarter profits growing by a stable 19% YoY on the back of a 36% growth in topline.

Exide, India's largest manufacturer of automotive batteries, was amongst the other star performers in the BSE A group, edging higher by nearly 4%. The strength could be due to the valuations catching up with fundamentals perhaps. The stock has not had a good ride this past few months as rivals, mainly Amara Raja Batteries took some market share from the company and also performed much better in terms of stock market performance. But it would be unwise to write off Exide and if the past history is any indication, it is only a matter of time before the company comes into the reckoning again.