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Raghuvir Srinivasan

The study reveals interesting details in terms of sectors that are in favour and those that are not.

Sugar stocks are the worst hit and trading close to their yearly lows; in some cases, even all-time lows. Interestingly, these stocks were at the forefront of the rally a year ago that took the index from below 9,000 in June back to 12 ,000 by September 2006. Stocks such as Dhampur Sugars, Bajaj Hindustan, Balrampur Chini and Thiru Arooran Sugars have seen their fortunes reversed in just a year. They hit their peaks exactly this time a year ago. The reversal in the sugar cycle has pushed these stocks out of market favour.

Not far behind are textile stocks which are also suffering due to industry-related factors such as competition and falling export market share, appreciating rupee and consequently eroding margins. Stocks such as Celebrity Fashion, Wels pun India, Suryalakshmi Cotton and Super Spinning are all trading way below their year highs. Some stocks from the industry are trading close to their yearly lows.

The most interesting trends are seen in the banking sector. The market has handed out preferential treatment to some bank stocks such as ICICI Bank, HDFC Bank, IOB, Bank of Baroda, Kotak Mahindra Bank and Indian Bank. These stocks are all trading either at their year highs or close to that. Some such as Indian Bank and HDFC Bank are at their all-time high values.

On the other side, there are those such as Canara Bank, Corporation Bank, Andhra Bank, Centurion Bank and IndusInd Bank that are yet to regain the peaks that they touched sometime in the last one year.

Clearly, the market has been selective in marking up stocks within the sector.

The cement industry may have hit a pink patch with rising prices for the product across the country and higher despatches. In fact, most cement producers have hit the ceiling on capacity and are now commissioning new plants. The market , however, is not enthused with all this. Cement stocks such as Ultra Tech Cement, Ambuja Cement, Dalmia Cement and JK Cement are way below their year highs. Others such as ACC, India Cements and Madras Cement are about 10 per cent off their highs.

Considering the excellent prospects for these companies, the fall back in the valuation of these stocks is probably no more than a correction.

A similar contradiction is seen in hotel stocks. Though rooms are fully booked in all the big cities of the country and rack rates are soaring, hotel stocks have lost some of their sheen in recent times. Oriental Hotels, EIH Associated Hotels, Indian Hotels, Asian Hotels and Taj GVK are some of the stocks that have come off their yearly highs.

Auto-component stocks have fallen out of favour and prominent stocks such as Sundram Fasteners, Subros, Sona Koyo Steering, Sundaram Clayton and Asahi India Glass are all trading well below their yearly highs. Bharat Forge, which was f or long a market favourite, now lists among the laggards.

The slow down in commercial vehicle offtake and the negative growth in two-wheelers have affected component makers now faced with falling orders. This coupled with higher input prices that have eroded margins is probably responsible for the market’s disinterest in auto-component stocks.

Rising global oil prices and mounting subsidy burden have been the bugbear of oil-refining and marketing stocks the last two years. Yet, these stocks witnessed a minor rally towards the third quarter of 2006-07 after a fall back in oil prices.

However, they soon lost steam when oil prices rebounded and the result is that all of them are trading significantly lower than their year’s peak. Indian Oil, Bharat Petroleum, Hindustan Petroleum and MRPL are all laggards in the current market rally.

IT stocks such as Infosys, TCS and Wipro are also trading way off their highs. Satyam Computer is the only IT stock that is trading close to its yearly high. Backlash from Budget proposals such as imposition of Minimum Alternate Tax an d bringing ESOPs under the tax net combined with the appreciating rupee are responsible for these stocks losing some of their charm.

A bellwether such as Infosys is trading about 20 per cent off its year high while Wipro is worse at 26 per cent off its high.

Yet another bellwether that is not rising in tune with the market is Hindustan Unilever which is more than 20 per cent off its year high. There are other FMCG stocks such as ITC, Marico Industries, Nirma and Nestle that also find thems elves lagging the broad market.

The main cause appears to be the concern over margins following input cost pressures and the inability to pass that on in a competitive market. A concern over the impact of VAT on cigarettes seems to be holding back the ITC stock.

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