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Broad rally behind Sensex’s 41% gain in the past year: analysis

Broad rally behind Sensex’s 41% gain in the past year: analysis
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First Published: Wed, Feb 21 2007. 10 04 AM IST
Updated: Wed, Feb 21 2007. 10 04 AM IST
Despite recent dips, the Bombay Stock Exchange’s benchmark index has risen 41.41% in the past year in a broad rally, with 25 of its 30 components posting positive returns during the period.
Over a fourth of the Sensex companies, or eight stocks, have risen more than 50%, in this period.
Leading the charge on the upside are Bharti Airtel Ltd, India’s largest listed telecom company, and Reliance Industries Ltd, India’s largest listed company, rising 117.96% and 101.66%, respectively.
The Sensex, which includes thirty of the Bombay Stock Exchange’s largest listed stocks, is considered the nation’s most popular barometer of stock performance.
The analysis covered Sensex performance from 20 February 2006 to 20 February 2007. The Sensex closed at 14,253.38 points on Tuesday.
In a sign that the rally has been fairly broadbased, two technology stocks are also in the top 10 best performing stocks during the past year.
Infosys Technologies’ was the fourth-fastest growing share, with 67.28% growth, while larger rival, Tata Consultancy Services, came in at the sixth position, rising 57.74%.
“Technology stocks definitely exceeded our expectations this year,” says Vasudeo Joshi, head of institutional equity research at Man Financial. “Technology companies were able to get bigger deals and improve margins. Not only the top four companies, but also mid-cap IT companies did well,” he explained.
With soaring demand for construction and rising prices, three cement stocks also made it to the top 10, including ACC Ltd, which grew 71.27%; Gujarat Ambuja Cement Ltd, which grew 50.87% and Larsen and Toubro Ltd, which is into cement manufacturing and construction and grew 48.54%. “Cement did well because of better capacity utilization, demand outstripping supply, and a sense that this trend would continue because of the large number of infrastructure projects taking off,” Joshi said.
But the blue-chip index also included six stocks that posted negative returns to shareholders in this period.
Hero Honda Motors and Hindustan Lever, were the Sensex’s worst performing stocks, dropping 19.10% and 16.39%, respectively, with Hero Honda, India’s largest two-wheeler manufacturer, underperforming the most.
The company faces both “internal and external threats,” said Harendra Kumar, headof research at ICICI Direct, an online brokerage. “On the one hand, their product proposition needs to be stronger, particuarly because of the success of Bajaj Auto’s Pulsar motorbike, and also because Honda, the parent company, intends to bring out similar products on it’s own.”
Other companies that posted negative returns to shareholders in the period include Reliance Energy, whose shares dropped 12.99%, and Ranbaxy Laboratories Ltd, which fell 9.78%. Two of the companies that announced India’s two largest overseas deals to date also underperformed.
The shares of Tata Steel, which is set to acquire Anglo-Dutch steel maker, Corus, grew 12.34%, while the stock of Hindalco Industries Ltd, India’s largest aluminium producer, dropped 3.73%. Hindalco stock nosedived after its successful $6 billion (Rs26,400 crore) bid to acquire the US aluminium flat-rolled sheet maker, Novelis.
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First Published: Wed, Feb 21 2007. 10 04 AM IST
More Topics: Money Matters | Equities |