Big winners & losers after the Budget

Several stocks are riding high on the back of friendly proposals in the recent Budget; others have taken a beating and are sliding down

The Budget announced in late February has given a definite direction to the stock markets, at least for the short term. The markets have taken kindly to the Budget, and are in a strong uptrend. Indeed, market sentiments have improved drastically from the pre-Budget days. Several stocks have benefited from the Budget proposals and are riding the wave of optimism.

The biggest gainer post-budget is Ferro Alloys Corporation Ltd, which has surged 75%. It closed at Rs11.14 on 25 February 2010 and was at Rs19.51on 5 March 2010. With the 2% hike in Central excise duty, steel prices are set to rise further, which will boost the revenues of Ferro Alloys Corp.

Sulzer India was trading at Rs785.50 on the day before the Budget. It rose to Rs1243.65 on 5th March, registering a phenomenal rise of 58% in one week. The manufacturer of mass transfer devices has gained on account of its delisting plans. Its parent company, Sulzer, which currently holds 80% stake in its Indian arm, wants to acquire the remaining 20% at Rs870 per share.

The excise hike has also benefitted Lloyds Steel Industries Ltd and Surana Industries Ltd, which have gained 29% and 24% respectively.

Narmada Gelatines Ltd has witnessed a rise of 40% while ADF Foods has surged 28% over this period.

Software and IT services companies Tricom India Ltd and Zenith Infotech Ltd have witnessed a 27% gain each post-Budget. Shares of Tricom India, a non-voice business outsourcing company, surged on the anticipation of bagging multi-year contracts. Deutsche International Trust Corporation picked up 0.348 million equity shares of the company last week.

Mukand Engineers Ltd and Petron Engineering Construction Ltd have gained 27% and 26% respectively. Amrutanjan Health Care Ltd has jumped 25% from Rs560.35 to Rs699.95.

On the other hand, some stocks have lost out after the Budget announcement. Kernex Microsystems (India) Ltd and Kalindee Rail Nirman (Engineers) Ltd have taken a negative view of the lacklustre Railway Budget. While Kernex Microsystems has lost 17% post-Budget, Kalindee has fallen 10%.

Steel products manufacturer Zenith Birla (India) Ltd and telecom solutions provider ADC India Communications Ltd (formerly KRONE Communications) have slipped 14% and 12% respectively.

Shree Ashtavinayak Cine Vision Ltd and Delton Cables Ltd have fallen 11% each. Amongst the other losers are STI India Ltd (-9%), Gemini Communication Ltd (-9%), Indian Acrylics Ltd (-8%) and AI Champdany Industries Ltd (-8%).

Between 25 February and 5 March 2010, each BSE index (BSE 100, BSE 200, BSE 500 and BSE Sensex) has registered a gain of 5%. The Sensex has risen from 16,254 to 16,994. The average gain in the Moneylife sample of companies is 6%.

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    Low MF assets speak volumes on investor apathy

    Despite a booming economy and vibrant equity markets, equity assets under management at many mutual fund houses remain abysmally low 

    At a time when the Indian economy is being lauded for its relentless growth and Indian companies are in the process of raising thousands of crores in the primary markets, the mutual fund industry is standing out like an eyesore. The sorry state of affairs in the mutual fund industry is evident from the miniscule corpus many of the fund houses are managing.

    Here are the unpleasant facts. 18 out of 37 Asset Management Companies (AMCs) have less than Rs1,000 crore as assets under management (AUM) in their equity schemes. From these, 13 funds have less than Rs500 crore of AUMs. On an average, these 18 fund houses have Rs355.99 crore in equity MF schemes. Between them, they are managing a ridiculously low corpus of Rs6,407.80 crore.

    Reliance Mutual Fund, the largest fund house, has AUM of Rs35,204 crore. HDFC Mutual Fund manages a corpus of Rs22,657 crore. These amounts might seem princely when compared to the small fund houses, but compared to international fund houses, even these are paltry.

    Shinsei Mutual Fund is the smallest among the 18 funds, having a corpus of Rs19.47 crore as on 10 February 2010 while Escorts Mutual Fund and Benchmark Mutual Fund have Rs28.32 crore and Rs48.88 crore respectively in their kitty.

    Quantum Mutual Fund and Baroda Pioneer Mutual Fund have AUM of Rs48.96 crore and Rs66.14 crore respectively.

    Some of the bigger names in the industry like Bharti AXA Mutual Fund (Rs308.37 crore), AIG Mutual Fund (Rs612 crore) and Axis Mutual Fund (Rs874.11 crore) also appear in the list of funds having less than Rs1,000 crore.

    Indian companies are capitalising on the recent bull-run by raising thousands of crores through IPOs and FPOs. In 2010, 17 companies have come out with public offers, (as on 8 March 2010). Despite the rush for raising funds and the flourishing equity markets, the investing public seems disinterested in vying for a share of the pie. The action in the equity markets has failed to catch on to the mutual fund industry.

    Indeed, the lull being witnessed by most equity fund houses is a study in contrast to the growth of the economy. Despite equities being touted as the best asset class for the long term, investors continue to shy away from equities. Even the government’s efforts towards encouraging participation in equity mutual funds have failed to do the trick.

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    Yogesh P K

    1 decade ago

    I think mutual fund houses are systematically (read legally) killed by government through AMFI to encourage insurance sector from which government earn a lot of revenue. Many mutual agents have stopped selling mutual fund product as now they earn no commission unless given by customers. Lack of incentive to agents is one of the biggest reason for this situation. Many mutual fund advisors have now started selling ULIP plans where they earn high commission.


    1 decade ago

    So we are trying to say that the MF industry is motivated when fat commisions are paid to distributors...What an irony Mf are meant to be an investment engine and not a commision making one ... I agree that banning the entry loads has contributed to demotivation of the distributors ...however it does highlight the fact how gullible an an indian investor is ....just because a distributors wants to make a good commision he will push an X mF to an investors who unfortunately is the one loosing money .....I believe this is the best opportunity for an investor to get himself educated about the tactics that were previously employed by commision hungry distributors to drive sales of an X MF. i believe that reality doesnt hide itself for long...... looking at the sats that are very well highlighted by moneylife we should learn our lessons.....

    K B Patil

    1 decade ago

    Investing in mutual funds is not an easy process. Brokers and distributors show interest in purchases only. For redemptions, you have to send requests to the MFs branch and they are mostly situated in urban areas.
    Then finally, KYC norms may turn out to be the last nail in the coffin. You can buy shares worth lakhs online. But, now KYC norms are again being tinkered with. Then, MF houses are coming with new funds which are nothing but old wine in new bottle. MFs never wanted to dirty their hands and sweat it out to educate investors in semi urban areas. Now, they are reaping the fruits of their laziness.

    Nagesh K

    1 decade ago

    This is because of ban on entry loads. SEBI took a one sided view of the issue. Ample options were available for corrective action on erring distributors which were not utilised, instead it went on banning entry loads. Now other products will be sold by distributors.


    1 decade ago

    You can not apply online for mutual fund.
    If you want to apply for some fund which is not sold by your distributor then you can not buy. I tried to open online transaction account but hardly any possitive responce from banks. Most want to push ULIPs as they offer hefty commision to agents. Idea of ATMF(any time mutual fund) was floated long back but no progress so far. Also if a fund is not serviced by CAMS or Karvy, there are few takers.



    1 decade ago

    This is a wake up call to the regulators who took a hasty decision of banning entry loads and thereby advisors commissions. All of us advisors are not the villians in this story please! This is also for the media who also paint us black in print, and the Fund house bosses who silently followed AMFI and SEBI not forgetting our contribution to the industry. These decisions made in air conditioned cabins and board rooms should have taken the pulse of the situation on the ground.

    Pradip Kumar Daftari

    1 decade ago

    Mutual Funds industry in India is still in the nascent stage. Rural and Semi Urban people needs to be educated and brought to its fold. Abolision of entry load and Distributor commission is the sole reason for the degrowth. In fact, marketing people needed more incentives to spread the awareness.


    1 decade ago

    I agree with Manoj & VSM, mutual funds are not bought but sold in India. Another typical example is government sponsored NPS, which is yet to take off basically because there is no incentive to those who would like to recommend it to their clients. Direct marketing in India will take ages before it takes off.


    1 decade ago

    Every products needs marketing. The marketing people will be compensated adequatly. Without remuneration who will work for it. The SEBI and the AMC'S think about it.

    Manoj Chaturvedi

    1 decade ago

    Lull in MF industry is not because of investors disintrest rather it is because of abolition of entry load on MF investments by SEBI from 1.8.09 & negligible payouts by AMC to the Distributors.Fact that since August 09, MF Industries AUM in Equity has been constantly faling. MF industry in India has always been compared to MF Industry in the west by SEBI where more than 90% of Investors invest in equity markets as compare to India where less than 10% of Investors invest. Fact is MF Industry in India is in its nacent stage.

    Mayuresh Risbud

    1 decade ago

    though the sebi has cut the brokerage the setback has to face to the amc's

    Market looks tired; wait for a fall to buy

    Withdrawal of support to the UPA government by its allies weakened the market rally towards the end of the day

    Indian markets gained momentum throughout the day but selling pressure weighed heavily on markets later towards the day after the Samajwadi Party and the Rashtriya Janata Dal decided to withdraw support to the UPA government after earlier disrupting the proceedings in both Houses of Parliament demanding quotas for Dalits, backward classes and Muslims within the Women’s Reservation Bill. Both parties disrupted Question Hour in the Rajya Sabha over the non-implementation of the Ranganath Misra Commission report on minority welfare, leading to adjournment of the House.

    During the day, index heavyweight State Bank of India (SBI) helped the bourses gain after the finance minister introduced a Bill in the Lok Sabha to allow the Bank to raise more capital from the market.

    We expect the market to stay up tomorrow. However, the index looks tired, so wait for two-three days to buy.

    At the end of the day, the Sensex rose 108 points from Friday’s close to 17,103, while the Nifty closed at 5,124, up 35 points.

    At the end of the day, SBI rose 1% after a Bill, seeking to reduce the Centre’s shareholding in the Bank from 55% at present to 51% and to allow the Bank to raise more capital from the market through preference shares, was introduced in the Lok Sabha.

    HT Media rose 1% after the company said that its unit, Hindustan Media Ventures, has filed draft papers with the market regulator for an initial public offer to raise up to Rs300 crore.

    Syncom Healthcare rose 3% after the company signed a pact with Africa’s Advanced Techno Lab for marketing the company's product in Congo.

    Man Industries (India) jumped 8% after the company secured an export order worth Rs950 crore from Kuwait for supply of 1.70 lakh tonnes of large diameter pipes.

    Nagarjuna Construction Company rose 2% after the company secured new orders worth Rs1,221 crore.

    Rama Paper Mills Ltd is setting up a power plant of 50MW in different phases by investing Rs200 crore. The stock was up 14%.

    Nicco Corporation has entered into a memorandum of understanding with Hitachi Cables, Japan, to jointly develop and pursue business opportunities in the Indian cable market with focus on the speciality cable segment. The stock was up 5%.

    The government will announce the industrial output data for the month of January 2010 on Friday, 12 March 2010. The data is expected to be robust after the infrastructure sector output—which accounts for 26% of industrial output—showed a growth of 9.4% in January 2010 from a year earlier. Industrial output grew 16.8% in December 2009.

    Meanwhile, on Saturday, 6 March 2010, the Securities and Exchange Board of India (SEBI) mandated 100% application money for qualified institutional buyers (QIBs) in public issues from 1 May 2010, with a view to bringing about a level playing field for both large and small investors. In a move to bring greater stability and depth to the stock market, SEBI has decided in principle to allow stock exchanges to introduce physical settlement of equity derivatives. SEBI has also allowed, in principle, the introduction of equity derivatives contracts with tenures of up to five years as well as derivative products based on the volatility indices.

    Rajan Bharti Mittal, the newly-elected president of industry body FICCI said that there’s no room for hardening of interest rates and the Reserve Bank of India should maintain the status quo on the rates to allow the industry to make fresh investments. He added that fresh investment announcements have begun across sectors and further increase in interest rates will only hamper economic growth.

    During the day, Asia’s key benchmark indices in Hong Kong, South Korea, Singapore, Taiwan, Indonesia, China and Japan rose between 1.25%-1.97%.

    According to data released by the Japanese finance ministry, Japan's current account surplus totalled 899.80 billion yen in January 2010, a sharp reversal from the 132.70 billion yen deficit a year earlier. The trade and services balance was 37.30 billion yen in the black, compared with 1.05 trillion yen in the red the previous year. The trade portion logged a surplus of 197.20 billion yen, while services posted a deficit of 159.90 billion yen. In the previous year, both categories were in the red, at 844.80 billion yen for trade and 212.40 billion yen for services. The income balance shrank 8.1% to 911 billion yen. Imports were up 7.1% year-on-year to 4.4 trillion yen, while exports surged 40.6% year-on-year to 4.6 trillion yen.

    On Friday, 5 March 2010, the Dow Jones Industrial Average was up 122 points while the S&P 500 and the Nasdaq Composite were up 16 points and 34 points respectively.

    As per media reports, US employers cut a net total of 36,000 jobs in February 2010, after jobs fell by 26,000 in January 2010. That was short of the expected 68,000 job loss, according to a consensus from economists. The unemployment rate, generated by a separate survey, held steady at 9.7%, versus forecasts for a rise to 9.8%. According to Federal Reserve data, consumer credit rose to $4.96 billion in January 2010, its first increase in a year and the largest for any month since mid-2008.

    In premarket trading, the Dow was trading 18 points higher.


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