BOC India: Buyback price rumoured to be revised to Rs375. Mid-June, Linde Holdings Netherlands BV announced that it would buy back 8.98 million shares in BOC India at a minimum price of Rs225.29. The CMP is Rs293. The company recorded strong quarterly results for June.
Spanco: There is talk of good results coming up from the company (net profit figure of Rs220 million-Rs250 million floating around). The fall on the last trading day of last week was rumoured to be due to an Ahmedabad-based operator offloading stocks. Also, there is talk that Spanco has been signed on for creating mobile banking software for SBI.
Areva T&D:There is some talk of the open offer being revised from Rs295 to Rs350.
Shipping stocks: All these stocks are rising on speculation that the wheat shortage due to the drought in Russia will kick-start dry bulk movement around the globe.
Gitanjali Gems: There is talk of real-estate development kicking off in a big way. This is not exactly a rumour since managing director Mehul Choksi himself has said in a recent interview that the company plans to develop 100,000 square feet of commercial real estate in addition to the 400,000 square feet of land it is already developing in Mumbai's suburbs. However, the talk in the market is that it is taking on millions of square feet.
RCom: There is buzz that the Etisalat deal to be announced this month @ Rs250 per share (CMP Rs173); on the other hand, there are rumours of problems in its books. There has been talk that Etisalat is looking at acquiring a 25% stake in RCom.
National Steel: It is looking to bring a Russian player on board. The company is a part of the Ruchi Group of Industries and has manufacturing facilities in central India.
Piramal Health: It might merge Piramal Life with itself. This rumour has gained momentum after a company official apparently told a member of the press on the sidelines of its 63rd Annual General Meeting in July that it is weighing this move.
Kingfisher Airlines: There are rumours of a PE fund and Rakesh Jhunjhunwala accumulating in the company.
VIP Industries: There are some rumours of Mr Jhunjhunwala adding to his holdings in the company. Please note that in June 2010 itself, Mr Jhunjhunwala's holdings went up to 5.8% from 4.5% earlier.
Walchandnagar Industries: There is some speculation over a possible bonus issue. Be warned that there is a possibility of some accounting (provisioning) issues in this company.
Tide Water: There is some talk of a possible bonus issue and a stock split.
The Sensex ended the week with a 2% gain. The market started the week on a strong note buoyed by the robust auto sales in July and kept marching ahead throughout the week. The upward trend was cut off by selling pressure on the last trading day. Manufacturing expansion picked up pace in July, a survey showed on Monday.
The HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, edged up to 57.6 in July from 57.3 in June when it was down from a multi-year high. The factory output index jumped to a four-month high of 62.3 in July from 60.5 in the prior month, pointing to a rate of expansion in production that was above the trend since the end of the financial crisis, according to survey compilers Markit.
RIL has said that it will pay $340 million in cash and $52 million in drilling cost to Carrizo Oil and Gas Inc and its partners for a 60% stake in the Marcellus shale-gas areas of central and northeast Pennsylvania.
Bharti Airtel retained its leading position among telecom service providers and posted a growth of 5% to end the 2009-10 fiscal with revenues of Rs38,800 crore.
During the week, the government passed a Bill to replace the ordinance issued to end the spat between the Insurance Regulatory and Development Authority (IRDA) and the Securities and Exchange Board of India (SEBI) over regulation of Unit-linked Insurance Plans. States opposed a draft bill to amend the Constitution, a measure proposed by the Centre for rolling out GST in its present form as it provides veto power to the Union finance minister in matters relating to State subjects.
India Inc seems to have regained its deal-making appetite with mergers and acquisitions (M&As) so far this year nearing the $50 billion level - already over three times the total for entire 2009. There were M&A deals worth about $16 billion in 2009, down from close to $40 billion in 2008.
In the US, an index of pending home sales fell to a record low in June while consumer spending and personal incomes were flat, raising concerns about the pace of the economic recovery.
Maruti Suzuki, hit by sharp increase in input costs, has decided to pass on part of this cost impact to customers. The price revision on various models ranges between Rs2,000 and Rs7,500.
The Reserve Bank of India (RBI) has said its ability to conduct the monetary policy freely has again come under threat due to the influence of the government's fiscal policies.
Weekly jobless claim data in the US revealed initial claims for jobless benefits rose to 479,000, the highest level since early April.
A medium-term top may be in place
Two weeks ago, I had said that there is a likelihood that the short-term high would now be around 18,300 on the Sensex. I had also said that if the Sensex crosses 18,300, we were in for an extended rally right up to 19,000, driven by global liquidity that would defy all logic. By a strange coincidence, the Sensex hit a high of 18,295 on Thursday, 5th August and started going down.
From a low of 15,960 that it had hit on 25th May, the Sensex has rallied by 2,300 points already. Although the market can always go higher—whether logical or not—it is, indeed, hard for me to see how we can head higher without a longish and substantial correction, as
I said previously. A fortnight ago, I was mildly bullish but cautioned that a downside break may come any day. Over the past few weeks of rally,
I had maintained that the strategy ought to be to buy the declines, not the momentum. And also run fast for the exit because a big decline may happen any moment. This has worked so far but the expiry date of this strategy probably was 5th August.
In our previous issue, we had become neutral in our medium-term outlook. Now, it is time to sell. The market may go up further but prudence dictates that you book your profits now. If the market corrects, you can buy quality stocks for the medium term again. If it does go up, risk would have only increased for meagre returns.
One of the key reasons to sell for the medium term is that the market has become overvalued. In all the hype and hoopla about strong economic growth, what is often missed is the fact that economic growth may not automatically translate into higher stock prices and returns for you. In your journey with stocks, where you will end up depends on where you start. If you start when stocks have already run ahead, you won’t make great returns. That is the stage we are at now.
In fact, what we are witnessing currently is a combination of high expectation, high valuation and low growth. Yes, you read it right, low growth. As regular visitors to our website www.moneylife.in know, we have published a few articles recently that show aggregate corporate results for the June quarter in a new light. It may surprise a lot of people that the results were rather poor. Sales growth was in double-digits but there was hardly any operating profit growth which is what primarily translates into net profit growth. If operating growth does not pick up in the next few quarters, the much-dreamt 26% net profit growth that the entire market is expecting for FY10-11 will be elusive. If so, there will be disappointment. And high valuation and earnings disappointment are a deadly combination.