Financial Daily
from THE HINDU group of publications

Wednesday, August 01, 2001



Markets | Next

Equities display see-saw trend in Q1

Sanjiv Shankaran

RESULTS for the first quarter of 2001-02 have started pouring. The results announced thus far have thrown up a few interesting patterns.

India Cement's share price displayed a flat trend over the last fortnight. At the moment, the stock hovers around Rs 35. Earlier in the week, the company declared its first quarter results (April-June 2001) that ought to have to left shareholders pleased .

The company registered a significant growth in net profit; the growth in profit came in the backdrop of lower sales. India Cements claimed the control on input cost and the increase in cement realisation helped increase the profit in the first quarter.

Reliance Petroleum's first quarter profit of Rs 456 crore exceeded analyst expectations. The company's share price saw a see-saw trend over the last fortnight, dropping from about Rs 46 to Rs 41, before it came hovering around the current level of Rs 45.

Dr Reddy's Laboratories that has provided a fantastic return in the stock market over the last six months is precariously perched as far as its stock market valuation is concerned. Hope rides on the company's performance in the US generic market.

Over there, a couple of critical court cases -- generally filed by the original patent holder to delay generic competitors' entry - have reached a critical stage. The verdict is likely to have a big impact on the company's valuation. The current price is about Rs 1,600.

Zee Telefilms has seen a significant selling over the last fortnight. The stock has dropped to Rs 82 from the level of Rs 103 a fortnight ago. During the course of the fortnight, shareholders had reason to be displeased about the quality of governance in Zee; the promoters bought back equity shares of other companies that had been placed with Zee earlier. All the deals connected with the development seem unnecessary.

Corporate governance is an issue growing in importance. For long, minority shareholders have not been given their due, and it has required regulatory fiat to make annual reports a little useful to investors. This is one area where more regulatory fiats c an only improve the climate in the stock market because it is likely to instil confidence in investors. A sea change from an era where minority investors seem to have been viewed as fools whose fortune was there for the taking.

BPL's share price plunged by about 25 per cent over the last fortnight to trade around Rs 40. The day's newspapers may have provided some relief to the shareholders because a recent survey indicated that BPL continues to be the leader in the colour telev ision market.

The financial institutions are on their way to acquiring the status of banks. The Reserve Bank of India seems closer to finalising the areas where existing FIs such as ICICI and IDBI would be given a concession once they become banks.

Given their unique evolution and current balance sheet structure, it may not be possible for ICICI and IDBI to become commercial banks immediately. The concession ought to ease the path and perhaps eventually level the playing field in the financial sec tor.

ICICI has fallen by 10 per cent during the last fortnight to about Rs 60. IDBI has also fallen by the same proportion during the last fortnight to trade around Rs 20.

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