Which companies eroded the maximum m-cap for shareholders! B&E’s Gyanendra Kashyap investigates...
IT companies, which contribute to around 11.2% of the Sensex profits, were the worst hit. The BSE IT index has gone down a massive 24% (yoy). Ironically, the quarterly results of these companies have been better than the market expectations but not delightful enough to restore the much needed investor confidence. For the last couple of months, the direct correlation between the BSE index and the rupee-dollar rate is all the more visible.
Allow us to show you the chain reaction: the weakened dollar caused the decline in the top line growth, pressurised the bottom-line thus leading to a fall in the stock prices thereby the market capitalisation too. But there’s another side to it too. “In order to hedge their open position, the export oriented sectors [including IT] hedged themselves to forex derivatives and suffered losses there too,” opines R. K. Gupta, MD, Taurus MF.
The free fall of the Sensex in the last quarter of the financial year (post 18th January 2008, after having touched the 21K mark on 10th January 2008) further dampened the market dynamics. It is an irony that FIIs, who were net purchasers to the tune of $17 billion till the end of 2007 have become net sellers to the tune of $2.62 billions till date, (it is no wonder that during the free fall in the month of January, the FIIs were net sellers to the tune of $3.18 billion). The market has corrected by approximately 23% in Q4 and the earnings, though on a positive note, have been below expectations. In the same quarter, the Indian market has underperformed most global markets by a significant margin. The BSE delivered returns of 19.7% and at the same time, 8 out of 30 stocks delivered negative returns; pharma behemoth Cipla had a negative return of 6.8%, while IT giant TCS topped the list with a negative return of 34.1%. Auto majors Tata Motors and M&M posted negative returns of 14.3% and 10.8% respectively. India perhaps is the only country where stock falls never result in CEO kickouts. Will it change in this coming year? We’re rolling on the floor laughing at our own question... We’re sure you’re too!
Allow us to show you the chain reaction: the weakened dollar caused the decline in the top line growth, pressurised the bottom-line thus leading to a fall in the stock prices thereby the market capitalisation too. But there’s another side to it too. “In order to hedge their open position, the export oriented sectors [including IT] hedged themselves to forex derivatives and suffered losses there too,” opines R. K. Gupta, MD, Taurus MF.
The free fall of the Sensex in the last quarter of the financial year (post 18th January 2008, after having touched the 21K mark on 10th January 2008) further dampened the market dynamics. It is an irony that FIIs, who were net purchasers to the tune of $17 billion till the end of 2007 have become net sellers to the tune of $2.62 billions till date, (it is no wonder that during the free fall in the month of January, the FIIs were net sellers to the tune of $3.18 billion). The market has corrected by approximately 23% in Q4 and the earnings, though on a positive note, have been below expectations. In the same quarter, the Indian market has underperformed most global markets by a significant margin. The BSE delivered returns of 19.7% and at the same time, 8 out of 30 stocks delivered negative returns; pharma behemoth Cipla had a negative return of 6.8%, while IT giant TCS topped the list with a negative return of 34.1%. Auto majors Tata Motors and M&M posted negative returns of 14.3% and 10.8% respectively. India perhaps is the only country where stock falls never result in CEO kickouts. Will it change in this coming year? We’re rolling on the floor laughing at our own question... We’re sure you’re too!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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