The Hindu Business Line : The May 17 hangover: Stocks seek lower levels in June

WHAT do the stocks of State Bank of Travancore, Asahi India, Amforge Industries and Gammon India have in common? They are all trading at levels lower than the intra-day lows they reached on May 17, 2004, when the Sensex fell by 564 points. Though the Sensex has recovered by about 12 per cent since the crash, quite a few stocks still rule below the lows recorded on May 17.

An analysis of 1,500 stocks that are traded regularly in the Bombay Stock Exchange reveals that as many as 504 of these are trading at levels below or close to the day's lows they reached on the black Monday. The sample of stocks includes a mixture of fairly well known companies with strong fundamentals as well as the second-tier companies. Tata Power, Century Textiles, Asahi India Glass, Exide Industries and Monsanto India are prominent companies to find a place in the sample.

A study of the shareholding pattern of these companies revealed a high proportion of domestic institutional investor holding. In the case of Tata Power and Exide, domestic institutional holding was about 25 per cent as on March 31, 2004. In contrast, the domestic institutional holding in the companies that have recovered significantly from the May 17 lows is relatively lower. These companies had a high proportion of FII holding. In the case of Reliance Industries, domestic institutional investors held a nine per cent stake while the FIIs held about 23 per cent. The stock has recovered by over 15 per cent from the lows recorded on May 17.

Interestingly, key PSU stocks such as Indian Oil, BPCL and HPCL, which have seen considerable volatility on account of the uncertainty surrounding the policy direction of the new dispensation at the Centre, are all trading at levels that are higher than the lows that were hit on May 17.

Other stocks that are trading at levels that are significantly lower than the lows they registered include Shree Precoated, Amforge Industries, Dai-ichi Karkaria, Hindustan Sanitaryware and Ambuja Cement.

The list had a fair representation of stocks from the banking, sugar, auto-ancillary and steel industry. Bulk of the stocks that continue to languish are predominantly the mid-cap and small-cap ones. In terms of market capitalisation, these stocks constitute only five per cent of the sample size. This indicates that companies with strong fundamentals and large market capitalisation have managed to recover ground significantly.

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