Why is Munjal Showa declining of late? According to Street talk, the counter has been absorbing the shock of intermittent selling by UTI during this quarter.

Brokers and dealers suggest that the mutual fund's gradual offloading is not because of fundamentals, but its strategy for profit booking and reshuffle.

Even though, according to market sources, accumulation has been continuing on dips, the steady supply since May has not been allowing the price to breakout.

On Thursday, the stock scaled up to Rs 386 on the NSE, but closed at Rs 357, down around 3 per cent. Week-on-week, the stock has, however, recovered by around 10 per cent. The combined traded volume in the counter on the NSE and BSE on Thursday was 10,487 shares.

The auto component maker, according to analysts, is in fact poised for a substantial growth in EPS this fiscal (from Rs 25.29 in 2005-06 to at least Rs 33) following its capacity expansion, which is expected not only to generate greater volumes, but operational efficiencies.

Market hopes that new value-added products, indigenisation and R&D efforts would enhance operational performance and margins for this debt-free company. It is understood that the company is faring better in terms of raw material and imported component cost this fiscal compared to the previous one.

Some market players indicate that UTI, which held over 5 per cent before the end of 2005-06 and 4 per cent as on June 30, 2006, has reduced its holding to nominal levels during this quarter.

Two other non-promoter investors, however, it is learnt, have raised their holding during the current quarter.

The forthcoming stock split (from Rs 10 to Rs 2 each) is expected to boost trading volumes.

Jayanta Mallick

(This article was published in the Business Line print edition dated September 15, 2006)
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