More than the farmers, the stock markets, it seems were more concerned over the fate of the monsoon. The likelihood of the below normal precipitation by the India Metrological Department recently spooked the markets. Con­cerns aired by the RBI governor dur­ing the credit policy announcement also did not go down well with the markets resulting in the Sensex shed­ding 1189 points during the fort­night beginning 22 May. The Sensex closed at 26768 on 6 June with 1000 points declining in the last five ses­sions itself.

While Raghuram Rajan did cut the repo rate by 0.25 per cent as was widely expected, the lowering of the GDP estimate to 7.6 per cent from 7.8 per cent projected earlier due to the interplay of global factors and the weather forecast saw markets re-rating prospects. This was against the back­ground of disappointing predictions of corporate earnings by brokerage houses. Mumbai-based Motilal Oswal Financial Services has cut down its earlier EPS estimate by 3 per cent to 71,605. This is 12 per cent down since November 2014. Foreign investors are also doing a re-think and pruning their exposure to India. HSBC Global Research in its report has stated that valuations need to be adjusted down­wards. Fils were net sellers to the tune of 74,408 crore in May with the momentum of sales having picked up in June. Till 5 June they were sellers
to the tune of 71,250 crore. Domes­tic investors had no option but to play bull to the Fils. Even so the over­all market cap of the companies listed on the BSE dipped below the 71 lakh crore mark yet again, to touch 799 lakh crore, down from the high 7106 lakh crore reached recently.

Fils have had a pretty good run in the markets over the last one year, since Narendra Modi took up the reins, with total returns averaging around 30 per cent and some amount of profit taking was inevitable. Espe­cially with neighbouring markets like China offering good if not better opportunities, by flooding the mar­kets with new issues, FPOs and IPOs. However no one really believes that the India story is over. And no seri­ous exodus is really expected from the equity markets.

SUN PHARMA

 

52 wk hi: 71,200 (7/4/14); low: 7594 (5/6/14) Change: -3%; Marketcap: 7205,985 crore

A better than normal spell rain could change the sultry dim: and lift the clouds of despair. W: reports of rains having arrived in Kt ala petering in, one is likely to see . change in investor sentiment soom than expected. The passage of the G5 Bill as is widely expected during the monsoon session of Parliament con.: aid the turnaround in sentiment More so, as some analysts predict the the implementation of a uniform GST could add at least 1.5-2 per cent to the GDP. The negative factor which coul: have an adverse impact is the fallou- in Greece and the further strength­ening of the US dollar vis-a-vis other global currencies.

Amongst the sectors which were most badly hit were finance and realty. Since the beginning of this year both these indices have under- performed the Sensex. Banks and finance companies are the largest contributors to the Sensex. The fears of NPAs continuing saw several banks touch 52-week lows. The lowering of the Standalone Credit Profile (SACP) of Bank of India to ‘bb+’ from ‘bbb-‘ saw its share price dip to 7183 from over 7300 at the beginning of the year. Allahabad Bank was the other PSU to have recorded its 52-week low. However the sales in the bank’s shares were not limited only to pub­lic sector banks alone. There was a wide-spread selling rally witnessed in private sector banks, including ICICI, HDFC Bank and HDFC. One factor which weighed on the mind of the investors was the fear that the 0.25 per cent cut in the RBI lending rate is

BANK OF INDIA

jso A share Price               Totalturnover

(7)                                                     (7 lakh)

 

1 Jan -4 June 2015

52 wk hi: 7333 (9/6/14); low: 7179 (5/6/15) Marketcap: 711,310 crore

probably the last one till at least com­ing October. Fears of limited precip­itation could lead to a spark in the prices of pulses and edible oil which could in turn impact inflation.

On the property front, DLF, the largest player with a market cap of over ?19,000 crore, in the investors presentation has not held out hopes of an early revival in demand. It has in fact said that the demand would remain around the same level, except in a few pockets. The shares of DLF were traded around ?107 down from ?242 a year ago on 9 June 2014. REITs could probably provide some relief to companies like DLF by providing liquidity against their commercial assets. Many of the property stocks are being reassessed.

Crude shock

Besides weak demand there were other factors which also impacted stocks. In case of Aban Offshore, which is in the business of provid­ing rigs for oil exploration, the low price of crude took its toll. Inves­tors reckoned that low prices may stem demand from explorers and a repricing of oil rigs would be inev­itable if the situation continued for some time. The drop was despite the improved performance declared by the company for FY15. On a consol­idated basis PAT rose to ?545 crore from the ?393 crore seen in FY14, mirroring a rise of 39 per cent.

Restructuring has been under­taken by companies in a bid to unlock value for shareholders, as also for some correction in the price

CIPLA

Total turnover of shares. Adani Enterprise, the hold­ing company of Adani group, saw a sharp fall from ?575 to ?115 soon after the record date. The company distributed shares of its subsidiar­ies Adani Ports & SEZ, Adani Power and Adani Transmission (unlisted) to remain a pure trading company. The group had started as a trading com­pany but with trading companies not getting the same valuation as the asset holding company, analysts believe that it may take some time for Adani Enterprise to regain its ear­lier sheen. Max India is the other big company which will be going in for similar restructuring.

Given the poor market condi­tions it is doubtful whether the government will go ahead with its divestment plans, at least not in the immediate future. Just Dial, market cap ?7,600 crore, one of the few stocks to have given positive returns in the recent past, shelved its plans for rais­ing funds and is instead planning to

ABAN OFFSHORE

 

M() 4 Share price

(t)

 

Total turnover (T lakh)

 

800,000,000

700,000,000

 

1 Jan – 4 June 2015

 

52 wk hi: 7940 (8/7/14); low: 7309 (4/6/15) Marketcap: 71,936 crore

go in for a buyback (through a ten­der basis where shares would be accepted on a proportionate basis). The buyback would be done at a maximum price of ?1,550 per share. This was against the ruling price of ?1,111. Institutions including Fils and private equity firms collectively hold around a 44 per cent stake in the company – higher than the pro­moter holding of 33 per cent. The shares were quoted at over ?1,800 on 5 August 2014.

The adverse performance follow­ing the takeover of Ranbaxy saw Sun Pharma’s share dipping by almost 15 per cent during the fortnight, from a high of ?1,000 to under ?850. Con­solidation in the pharma sector saw Cipla ruling steady.

Many companies that had come out with FPOs saw their share prices dip below the offer price. Tata Motors’ shares were quoted at ?442 as against the offer price of ?450 while the DVR shares were also quoted marginally below issue price. The company had raised ?7,500 crore on a rights basis.
Consumer stocks are the ones to watch out for in the coming weeks. A better than expected monsoon could again see a rerating in this segment as rural demand has a material impact on the companies in this sector. For the coming fortnight the two factors to be watched for are the onset of the monsoon and the Parliament session which will begin on 5 August and last for 26 days. The current fall in the market has thrown up good opportu­nities for bottom-fishing.

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