Marginally down on a lackluster day

Thu, 17 Dec Closing

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Markets slid from the highs during the final hour and closed marginally in the negative today. In what could be termed as a pretty volatile session, BSE Sensex closed lower by around 20 points (down 0.1%) while NSE Nifty lost in the region of 6 points (down 0.1%). BSE Midcap and Smallcap indices bucked the trend and ended higher by around 1% each. While IT, metals and auto supported the upmove, it was more than negated by infrastructure and telecom stocks. For every one stock that gained on the Sensex, one stock declined.

As far as global indices are concerned, while those in Asia ended in the red today, European indices are also trading weak currently. The rupee was trading at Rs 46.9 to the dollar at the time of writing.

The markets are just refusing to let go of the 17,000 mark on the Sensex. And why would they? There aren't enough compelling reasons at the moment to take them significantly higher in the near term. Every positive news flow is more or less accompanied by a negative one, the end result being both of them canceling each other out. Thus, while India's GDP growth in the second quarter and industrial growth in the month of October was indeed music to the ears, the optimism was quickly put to rest by spiraling food prices, which at last count had increased the most in 11 years, and an era of higher interest rates that it could bring. The only hope seems to be recovery in the western world but even here, only certain export oriented sectors might benefit. All in all, the risk reward ratio in Indian equities does look tilted in favour of the former if you have a near term horizon in mind.

Media stocks traded mixed today. However, Jagran Prakashan with a 6% jump in its price, stole the show today. The company, which is one of India's largest vernacular dailies, has finally hit some purple patch in recent times. The company had witnessed a staggering 11% jump in its operating margins during the second quarter and it is hopeful that for the remainder of the year, margins should hold up pretty strong. Furthermore, there is a strong possibility that April onwards, a hike in advertisement rate could also start happening, thus giving further boost to its profitability. Also, the long term prospects for growth are also favorable as there is a population of around 360 m in India who are literate but do not currently read any publication. Revenues from newspaper publishing are expected to grow at a compounded annual rate of 9% over the next 5 years and are projected to reach a size of Rs 245 bn, thus benefiting leaders like Jagran Prakashan.

Another stock that witnessed a strong jump in its price was Pantaloon Retail. Infact, the stock touched its 52-week high on the BSE Sensex. The stock has been in the news in recent days mainly on account of the reported restructuring of its various businesses. The company would be restructured along three verticals and this would involve consolidation of PRIL as a pure retail play and transfer of the Big Bazaar and Food Bazaar segments into wholly owned subsidiaries. Investors seem to be taking a positive view of the restructuring as evident from the jump in its share price ever since the announcement was made. Further, the hive off of Big Bazaar is an extremely positive step as it will allow more efficient use of capital and investors can also get a direct exposure to discount retailing, a segment with a very bright future, as and when Big Bazaar gets listed.