Nifty, Sensex may remain strong for a couple of days more: Thursday Closing Report

The Nifty has crossed the first target of 5,850. The next target is around 5,940

The market closed in the positive aided by a splendid recovery in the second half of trade, settling higher for the third day in a row. The Nifty has crossed the first target of 5,850. The next target is around 5,940. The National Stock Exchange (NSE) reported a lower volume of 54.49 crore shares and advance-decline ratio of 830:653.
The market opened in the negative on profit booking after two straight days of gains. On the global front, US markets closed mostly higher overnight as data on Wednesday showed that private sector companies added 198,000 employees last month. The US government is expected to announce its official non-farm payrolls report on Friday. Markets in Asia were mixed in morning trade as investors await the outcomes of policy meetings of central bankers in Japan, UK and Eurozone.
The Nifty slipped 18 points to open trade at 5,801 and the Sensex resumed trade at 19,222, 31 down 31points from its previous close. The market witnessed a high degree of volatility with the benchmarks moving between red and green in morning trade. 
The opening figure on the Nifty was its intraday low while the Sensex in late morning trade with the index touching 19,213. Selling pressure in metal, oil & gas and auto stocks kept the market in the negative in the first half of trade today. 
However, a positive opening of the key European indices saw the domestic market paring its losses and emerging into the positive in post-noon trade. The benchmarks hit their highs in the closing moments of trade.  The Nifty touched 5,878 and the Sensex climbed to 19,466.
The market closed near the highs on a bounce back which began from the post-noon session. The Nifty gained 44 points (0.77%) at 5,863 and the Sensex surged 161 points (0.84%) to settle at 19,414.
The BSE Mid-cap index advanced 0.48% and the BSE Small-cap index climbed 0.85%.
Except for BSE Consumer Durables (down 0.57%); BSE Metal (down 0.43%) and BSE PSU (down 0.11%) which ended in the negative, all the other sectoral indices closed in the positive. The top gainers were BSE Realty (up 1.68%); BSE IT (up 1.66%); BSE Capital Goods (up 1.59%); BSE TECk (up 1.34%) and BSE Bankex (up 0.86%).
Twenty of the 30 stocks on the Sensex closed in the positive. The main gainers were Hero MotoCorp (up 4.05%); TCS (up 2.10%); Larsen & Toubro (up 2.08%); Maruti Suzuki (up 2.07%) and Wipro (up 1.82%). Among the losers were Jindal Steel & Power (down 2.28%); Hindustan Unilever (down 1.69%); Coal India (down 1.25%); Tata Motors (down 1.07%) and Tata Steel (down 0.74%). 
The top two A Group gainers on the BSE were—Bharat Forge (up 7.74%) and Mahindra & Mahindra Finance (up 4.86%).
The top two A Group losers on the BSE were—MMTC (down 5.18%) and MCX (down 3.81%).
The top two B Group gainers on the BSE were— Globus Corporation (up 20%) and Orchid Chemicals & Pharmaceuticals (up 19.98%).
The top two B Group losers on the BSE were—Vybra Automet (down 19.94%) and VSF Projects (down 19.87%).
Of the 50 stocks on the Nifty, 31 ended in the green. The key gainers were Hero MotoCorp (up 4.61%); DLF (up 3.67%); Asian Paints (up 2.86%); ITC (up 2.40%) and L&T (up 2.38%). The main losers were JSPL (down 1.99%); HUL (down 1.70%); Coal India (down 1.32%); Ambuja Cements (down 1.09%) and Tata Motors (down 1.02%).
Markets across Asia closed mixed as the Bank of Japan rejected a call for an early start to its open-ended assets purchases, due to begin next year. Speculations that the Chinese banking regulator has tightened its monetary policy also weighed on investors.
The Jakarta Composite gained 0.49%; the Nikkei 225 advanced 0.30%; the Straits Times rose 0.20% and the Taiwan Weighted settled 0.13% higher. Among the losers, the Shanghai Composite tanked 0.98%; the Hang Seng shed 003%; the KLSE Composite slipped 0.06% and the Seoul Composite declined 0.81%.
At the time of writing, the key European markets were around 0.50% higher and the US stock futures were trading with marginal gains.  
Back home, inflows from foreign institutional investors in the equities segment on Wednesday were offset by withdrawals by domestic institutional investors. While FIIs invested Rs524.06 crore into stocks, DIIs took away Rs599.99 crore.
Spectrum Foods has informed BSE that the company is setting up a project of salt refinery of capacity 1 lakh TPA & spices along with a wind turbine of 2 MW. For this purpose the company has been sanctioned a term loan of Rs17.4 crore from State Bank of India and to meet the balance fund arrangement the company is re-issuing the forfeited shares on preferential basis to body corporates. The project for wind mill is to be completed by 31 March 2013 and for salt and spices by 31 December 2013. The stock fell 4.94% to Rs76.90 on the BSE.
The “tools down” strike at auto major Mahindra and Mahindra’s Nashik facility has entered the third day even as the company claimed to have suffered a production loss of 500 units due to the ongoing labour unrest. Around 3,000 workers at the Nashik manufacturing facility, which produces Scorpio, Bolero and Xylo models of SUVs and Verito (sedan), are taking part in the agitation demanding revocation of the suspension orders of one of their union leaders Praveen Shinde. The stock was up 1.48% and closed at Rs891 on the NSE.
Aditya Birla Chemicals has commissioned and started commercial production at its brownfield project at Renukoot in Uttar Pradesh, with a capacity to manufacture 145 million tonne per day of caustic soda. The company has incorporated a membrane cell technology at the plant. The stock settled 0.65% higher at Rs84.60 on the NSE.



CRISIL’s target price forecast of Spanco, graded 5/5, was Rs289. Today’s price? Rs16!

CRISIL is not a stock broker which is not serious about its buy calls and target prices. Indeed, CRISIL’s ‘analysts’ are supposed to be more hardnosed than equity analysts, given that CRISIL is an ‘expert’ in rating debt. If so, what can explain this kind of analysis and recommendation? Vested interest?

One of the biggest names in the business of analysis, Credit Rating and Information Services India (CRISIL), seems to be habitually making blunders in its equity analysis. This time we bring you the story of Spanco. Ever since CRISIL started covering Spanco, back in 2011, the stock has only nosedived from Rs133 to less Rs16 (at the time of writing this piece)! What is interesting (or should we say shocking?) is that CRISIL had stubbornly stuck to the target price of Rs289, according to an interesting blog, which keeps track of forecasting errors.

In CRISIL’s initial coverage report which was published on 28 July 2011, the ratings agency said: “We maintain our fair value of Rs289 per share and valuation grade of 5/5.” Furthermore, it stated, “We maintain the fundamental grade of 3/5, indicating that Spanco’s fundamentals are good relative to other listed securities in India.” The prevailing price was Rs133 then.

Fast forward little over a year, Spanco tanked to Rs69. In the face of this share price decline, CRISIL’s analysts stood firm. They came up with yet another report on Spanco, on 11 May 2012. In this report, they restated almost the exact same thing: “Post further interaction with the management, we will introduce FY13 forecast and revisit our estimates and fair value. At the current market price of Rs 69, our valuation grade is 5/5.” It even said, “We maintain our fundamental grade of 3/5.”

Today, the share price is below Rs16, or 94.46% down from CRISIL’s original target price of Rs289. This is not a big error—it is a massive dislocation from the forecast. This isn’t the first time that CRISIL has made this sort of error. It has done a similar sort of thing for Everest Kanto Cylinders (EKC). Sometime in October 2010, it had given EKC a rating of 4/5 and a target price of Rs146 (the prevailing price was Rs124). Two years later, on 29 November 2012, the price tanked nearly 78% to Rs28 while the company gave it a target price of Rs33!

However, we noticed something very odd in CRISIL’s second report. Somehow, the Spanco which was then experiencing difficulties in servicing debt obligations suddenly improved its collection period almost overnight. CRISIL’s report stated, “Spanco’s credit rating was downgraded from CARE B to CARE D on 6 April 2012 due to delays in servicing of debt obligations. The grade was then revised on 30 April 2012 to CARE C. According to the ratings agency, this was due to an improvement in the collection period and consequent improvement in the debt servicing by the company.” When the rating is revised from CARE B grading to CARE C grading that should set off alarm bells for a “fundamental analyst”. Just because it went up from CARE D to CARE C grading doesn’t mean the target price of Rs289 should be maintained. We see the anchoring bias at play here, when the reference level is CARE D and not CARE B grading. This bias is quite common.

This isn’t the first time that we have written about CRISIL’s fishy reports with a special penchant for giving 5/5 to junk or near-junk stocks. 

Earlier we wrote how it rated 5/5 for Helios & Matheson a small-time software company based in Chennai despite a pending criminal case against its chairman and MD. The Enforcement Directorate (ED) is currently pursuing investigations against Mr Ramachandran and Mr Muralikrishna, the chairman and director of Helios & Matheson respectively. When this sort of thing is going on, it is an obvious red flag. Unfortunately, this was ignored or overlooked by CRISIL’s analysts.

Click here to read the Helios & Matheson story. 

It is common to find stockbrokers coming out with buy recommendations on stocks that lose 80%-90% of their value. They usually have some vested interest. Earlier this year, we had written about Opto Circuits, when broker ICICIdirect kept a BUY on the company even as the share price of Opto Circuits was careening downwards.

Click here to check the ICICIdirect and Opto Circuit story.

Then there’s the case of Arshiya International when Kotak Securities had predicted that it would be the best performer of this year. Instead, the share price has tanked 75% since their call.

Click here for the Arshiya International and Kotak story.

But it is quite remarkable for an ‘independent’ research agency, that has a through grounding in dealing with more conservative world of debt securities to come out with 5/5 recommendations not on blue chips, not on solid mid-caps, but on stocks turn out to be hollow.

One of the crucial components of making a good forecast is not so much to be just close to the mark, though it is important to be as accurate as possible, but revaluating forecasts based on new information. This is what sets apart great forecasters from ordinary hacks. Even great forecasters and analysts make mistakes but they do re-evaluate based on fresh information and give their logical reasons why. When new material information is revealed, it is imperative that it will have a huge bearing on the forecast and target price. What is shocking about CRISIL’s forecast of Spanco is that its share price kept going down while it stubbornly stuck to its original forecast. The analysts in CRISIL should have at least investigated the decline in its share price and the reason behind it.

Rating agencies like Standard & Poor (S&P) which the parent company of CRISIL and Moody’s came under heavy fire in the United States for their flawed forecast of high risk mortgage securities which they stamped as high-grade. The United States government recently filed a class-action lawsuit against S&P for its role in the sub-prime crisis. CRISIL’s rating quality in equity stocks indicates that no lesson has been learnt. Analysts remain as unaccountable as before.



pinakin mamtora

5 years ago

Lesson to be learnt by Indian investors: do not be influenced by big names when making investment decisions. Another real-life example is that of the so-called Indian Warren Buffett, who off-loaded a good part of his holdings at Rs.400 per share in the IPO of A2Z Maintenance Engg & even made a rare appearance at the pre-IPO press conference of that company, probably to recommend the IPO to his fans in the markets... & today, A2Z is quoting at just Rs.20 or so. Eternal vigilance - especially when it comes to what 'experts' & 'reputed' names opine - is a must for Indian investors.


5 years ago

Dear MoneyLife Team,

What is really more surprising for me is the way you write and get ready for a mud-slinging game on other firms and analysts! You have written about ICICI, HDFC, Kotak, CRISIL etc etc but you for got your own article "Sweet Pill" on Surya Pharmacy which investors might have bit the dust and as a matter of fact that your call is even worse than any of the above miss calls. You cleverly or ignorantly not mentioned that example. WHY? Becuase it is from your own house yet got ready to sling on others!

1. Moneylife article dated Mar 24, 2011 about Surya Pharmacy titled "Sweet Pill".

2. MoneyLife article dated June 18, 2010 about Surya Pharmacy titled "Perfect prescription".

Now as a reader, I give you two choices:

1. You never written any follow up article on your worst call Surya Pharmacy. Yet mud-sling others. Why?
2. Delete my comment before your readers realize your double standards :)

The choice is yours, answer or delete?


Debashis Basu

In Reply to sreekanth 5 years ago

Hey, if you have to bitch about us, you have to take the trouble to be factual.
1. All Moneylife readers know (casual mudslingers like you need to be educated) that we recommended a precise stop-loss and stop-profit till 2011. On this basis, anybody buying Surya Pharma would have been out of the stock at a substantial profit. What a surprise for you, right? Snotty analysts of Crisil and other places do not even know that is a stop profit and a stop loss.
2. Since 2012, we have offered a review of our recommendations in every issue, on an ongoing basis. No other publication does this. I guess you have either not noticed, or prefer to ignore it because how would it fit into your vile mind.
3. Since there are careless readers who read selectively and act selectively, from 2012, we have dispensed with the automatic stop-loss and stop-profit formula, which used to be there at the bottom of Street Beat in each issue. We have replaced this with ongoing review and recommendations so that nobody is every in doubt about our current call on a stock we have recommended in the past.
4. Those who read Moneylife you will know that we are the only publication, which has been doing a yearly review of our stock recommendation with all the hits and misses. Our performance has been excellent year after year, even in a declining market.
You are free to comment here but if you learn to be factual. Otherwise we will surely delete your comment and block you. I simply do not have the time to read your trash and compose a reply for loathsome creatures like you.
And while we are at it, here is a reader response to the quality of our stock analysis. Read and burn inside, given how full of bile you are.


5 years ago

To whom to believe is a question! Thank you for bringing out this article where CRISIL behaved as a speculator gambler. I don't think CRISIL with respond to this mail.


5 years ago

Listen Everyone. Don't believe anyone. Try to keep stop loss. Don't worry while booking loss. Do your own study. Shares are falling down because of the following reasons
1. Debt
2. Pledging of shares
3. Low promoter holding
4. Margin trigger
5. Poor performance
All the above five are coupled with each other.

Ramesh Poapt

5 years ago

Great ML team!Pl continue to highlight such issues in the best interest of retail investors from halal street general,investors to be alert when pleadged % is high and FCCB issuance is high.Lenders are offloading mercilessly shares n sometimes to much lower level than the 'fair value'!In last one month, we saw such many tragedy in mid/smallcaps.Muutual funds are smart enough to smell!

Dayananda Kamath k

5 years ago

if this is analytical skills of cricil how we can believe their credit ratings. god save the banks who depend on their ratings and the stock analysts, who also depend on crisil rating for their analysis


5 years ago

Shocked to read the full report and story as above : the leading institution CRISIL giving the target for SPANCO's share price as Rs. 289 but share falling below Rs.16 ! This calls for full investigation : who lost, who gained, how recommended ?? etc.
SEBI must wake up and prove it is doing it's job.


5 years ago

Crisil has the authority to upgrade and downgrade stocks of various firms.Is there any organisation that regulates these rating agencies and penalize them for their wrong doing?


5 years ago

have you gone through crisil's fundamental and valuation rating in respect of confidence petro...?
check out and you may find many more worms in the can. apparently reports are influenced only to fulfil certain nefarious designs of promoters and/or some other vested interests.small time investors or should i say traders are being parted from their money by these tools used by such respected and highly regarded names of the financial world.vry vry sad.....!

Anil Agashe

5 years ago

CARE seems to have revised credit rating twice in the space of 15 days!What great efficiency!

Wednesday Closing Report: Nifty, Sensex rally nearing exhaustion?

The rally that started on Monday morning may last for another two days. The Nifty may stall at around 5,850

The rally that started on Monday morning may last for another two days. The Nifty may stall at around 5,850.  The National Stock Exchange (NSE) recorded a volume of 72.52 crore shares and advance-decline ratio of 1045:474.
The market opened in the green on hopes of a recovery in the global economy. US markets had closed higher on Tuesday as the Institute for Supply Management's services index registered 56 from 55.2 in the previous month. Markets in Asia were in the positive in morning trade today tracking overnight gain in the US markets.
The Nifty opened 32 points higher at 5,816 and the Sensex started off at 19,254, a gain of 111 points over its previous close. A minor bout of profit taking in early trade saw the indices touching their intraday lows (albeit in the positive) around 9.45am. The Nifty fell to 5,795 and the Sensex went down to 19,195 at their respective lows.
Buying activity helped the market bounce back from their lows in subsequent trade. a firm opening of the key European indices kept the momentum intact in the second half of the trading session.
Sustained buying led the benchmarks to their highs around 1.45pm. At this point, the Nifty touched 5,829 and the Sensex climbed to 19,293. 
The market pared a small part of its gains on profit booking but settled in the green for the second day in a row. The Nifty advanced 34 points (0.59%) at 5,819 and the Sensex closed at 19,253, climbing 109 points (0.57%) over its previous close.
The broader indices outperformed the Sensex today, as the BSE Mid-cap index climbed 1.14% and the BSE Small-cap index climbed 1.50%.
Except for BSE FMCG (down 1.05%) and BSE Consumer Durables (down 0.44%) which ended in the negative, all the other sectoral indices closed in the positive. The top gainers were BSE Realty (up 4.52%); BSE Capital Goods (up 2.47%); BSE Metal (up 2.20%); BSE IT (up 1.32%) and BSE TECk (up 1.04%).
Eighteen of the 30 stocks on the Sensex closed in the positive. The main gainers were Sterlite Industries (up 4.60%); Hindalco Industries (up 3.25%); Tata Motors (up 2.88%); Larsen & Toubro (up 2.86%) and Tata Steel (up 2.59%). Among the losers were Mahindra & Mahindra (down 2.16%); Hindustan Unilever (down 1.98%); ITC (down 1.57%); Maruti Suzuki (down 1.21%) and GAIL (down 0.83%). 
The top two A Group gainers on the BSE were—HDIL (up 12.23%) and Mahindra & Mahindra Finance (up 7.04%).
The top two A Group losers on the BSE were—AstraZeneca Pharma India (down 7.27%) and MMTC (down 6.12%).
The top two B Group gainers on the BSE were—La Opala RG (up 20%) and Zuari Global (up 19.99%).
The top two B Group losers on the BSE were—GSL Nova (down 12.93%) and Virinchi Tech (down 11.41%).
Of the 50 stocks on the Nifty, 30 ended in the green. The key gainers were Jaiprakash Associates (up 5.67%); IDFC (up 4.75%); DLF (up 3.92%); Siemens (up 3.45%) and Sesa Goa (up 3.41%). The main losers were Hindustan Unilever (down 2.10%); M&M (down 1.96%); ITC (down 1.71%); BPCL (down 1.12%) and Power Grid (down 1.01%).
The Asian pack closed in the positive on firm economic data from the US and hopes that governments across the world would continue growth boosting measures.
The Shanghai Composite gained 0.90%; the Hang Seng climbed 0.96%; the Jakarta Composite surged 1.58%; the KLSE Composite advanced 0.57%; the Nikkei 225 jumped 2.13%; the Straits Times surged 1.09%; the Seoul Composite rose 0.20% and the Taiwan Weighted settled 0.22% higher.
At the time of writing, the European markets were trading with gains between 0.14% and 1.03%. At the same time, the US stock futures were in the positive, indicating a firm opening for the US markets.
Back home, foreign institutional investors were net buyers of equities totalling Rs220.80 crore on Tuesday. On the other hand, domestic institutional investors were net sellers of shares amounting to Rs244.80 crore.  
The board of directors of Mukta Arts at its meeting has decided to obtain approval from shareholders to form a company as a subsidiary of Mukta Arts which will carry on the business of exhibition and programming which is presently being conducted by the company itself and forming substantial part of the company revenue. The stock rose 0.50% to close at Rs30.30 on the NSE.
Micro Technologies announced that it has received attractive orders from renowned educational institutions to provide security to their campuses in the commercial capital. These security solutions will enable to provide security cover to students and faculties of some of the top 50 educational institutions and business schools. Besides providing safety and security for the students and assets of the educational institutions, they also deter miscreants in the campus and thereby ensuring safer educational environment and eliminating problems for their administrators. The stock rose 7.57% to close at Rs43.80 on the NSE.
Pharmaceutical major Elder Pharmaceuticals has entered into a joint venture agreement with Japan-based Kose Corporation to manufacture and sell cosmetics in the domestic market. The JV will have 60% holding by the Japanese partner while the Elder will hold remaining 40%. The stock gained 1.44% to close at Rs317 on the NSE.


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