Sensex suffers vertigo, slumps to five-week low
The Economic Times, June 9, 2009, Page 17
INVESTORS BOOK PROFIT AS MANY FEEL CURRENT VALUATIONS ARE STRETCHED
Our Bureau MUMBAI
EQUITY benchmarks on Monday declined the most in five weeks, mirroring global weakness, as investors booked profits on concerns that recent upsides were not sustainable unless corporate earnings showed signs of recovery. With the wider section of the market perceiving that stock valuations are stretched for the moment, brokers expect Indian equities to continue tracking global trends, at least till a few sessions before the Budget on July 3.
BSE’s 50-share Sensex closed at 14665.92, down 437.63 points, or 2.9%, over the previous close. NSE’s 50-share Nifty ended at 4429.90, down 157 points, or 3.42%. Secondline shares bore the brunt of the sell-off, with the BSE Mid-cap and Small-cap indices tumbling 5-6%. Trading in 806 stocks on BSE were frozen at the lower end of the intraday circuit filter after there were only sellers.
The bear domination in the market was complete, with losers thrashing gainers 2246: 582 on BSE.
“There was no newsflow to trigger the correction, so it had to be profit booking,” said Prateek Agrawal, V-P and head-equity, Bharti AXA Investment Managers. “Of course, there are concerns about the sudden strengthening of the dollar against the rupee and uncertainty whether certain QIPs (qualified institutional placements) may get closed or not,” he added.
Money-starved Indian companies have rushed to raise money through QIPs in the past month or so, thanks to the sharp rebound in stock prices worth 70-90% over the past three months. Brokers said some of these QIPs were steeply priced, sparking fears if they would find buyers and would convey the ‘wrong signals’ to investors about stock valuations.
On Monday, foreign institutions net bought Indian shares worth Rs 831.95 crore while their domestic counterparts net sold worth Rs 480.13 crore, according to provisional NSE data.
Shares of software majors bucked the broader weak trend due to the rise in dollar against the rupee. Since most software companies bill majority of their revenues in dollars, investors hope the strengthening of the US currency would boost profits.
But, analysts are cautious about the immediate prospects of top software shares such as Infosys, TCS and Wipro on apprehension that existing prices do not justify earnings.
“FY10E P/E (price to earnings) multiples have increased ~67- 86% YTD (year-to-date) for frontline IT stocks, even as consensus EPS (earnings per share) estimates have declined 9-14%,” said BNP Paribas Securities India’ Abhiram Eleswarapu and Avinash Singh, in a report.
“This reflects not just increased risk appetite for equities, in our view, but also investors pre-empting significant earnings upgrades,” they added.
The Economic Times, June 9, 2009, Page 17
INVESTORS BOOK PROFIT AS MANY FEEL CURRENT VALUATIONS ARE STRETCHED
Our Bureau MUMBAI
EQUITY benchmarks on Monday declined the most in five weeks, mirroring global weakness, as investors booked profits on concerns that recent upsides were not sustainable unless corporate earnings showed signs of recovery. With the wider section of the market perceiving that stock valuations are stretched for the moment, brokers expect Indian equities to continue tracking global trends, at least till a few sessions before the Budget on July 3.
BSE’s 50-share Sensex closed at 14665.92, down 437.63 points, or 2.9%, over the previous close. NSE’s 50-share Nifty ended at 4429.90, down 157 points, or 3.42%. Secondline shares bore the brunt of the sell-off, with the BSE Mid-cap and Small-cap indices tumbling 5-6%. Trading in 806 stocks on BSE were frozen at the lower end of the intraday circuit filter after there were only sellers.
The bear domination in the market was complete, with losers thrashing gainers 2246: 582 on BSE.
“There was no newsflow to trigger the correction, so it had to be profit booking,” said Prateek Agrawal, V-P and head-equity, Bharti AXA Investment Managers. “Of course, there are concerns about the sudden strengthening of the dollar against the rupee and uncertainty whether certain QIPs (qualified institutional placements) may get closed or not,” he added.
Money-starved Indian companies have rushed to raise money through QIPs in the past month or so, thanks to the sharp rebound in stock prices worth 70-90% over the past three months. Brokers said some of these QIPs were steeply priced, sparking fears if they would find buyers and would convey the ‘wrong signals’ to investors about stock valuations.
On Monday, foreign institutions net bought Indian shares worth Rs 831.95 crore while their domestic counterparts net sold worth Rs 480.13 crore, according to provisional NSE data.
Shares of software majors bucked the broader weak trend due to the rise in dollar against the rupee. Since most software companies bill majority of their revenues in dollars, investors hope the strengthening of the US currency would boost profits.
But, analysts are cautious about the immediate prospects of top software shares such as Infosys, TCS and Wipro on apprehension that existing prices do not justify earnings.
“FY10E P/E (price to earnings) multiples have increased ~67- 86% YTD (year-to-date) for frontline IT stocks, even as consensus EPS (earnings per share) estimates have declined 9-14%,” said BNP Paribas Securities India’ Abhiram Eleswarapu and Avinash Singh, in a report.
“This reflects not just increased risk appetite for equities, in our view, but also investors pre-empting significant earnings upgrades,” they added.
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