India Insight

Sensex loses 3.75 percent in action-packed month

August 30, 2013

The BSE Sensex lost 3.75 percent in August, its worst monthly performance since February, as worries over foreign outflows were exacerbated by the rupee that fell to record lows.

India’s current account deficit and a struggling economy still worry market participants.  Data showed on Aug. 31 that June quarter GDP grew at 4.4 percent, below analysts’ estimates.

The rupee recovered in the last few trading sessions of the month, closing around 65.75 per dollar after falling to a life low below 68. Still, the unit lost 8.1 percent in August, its biggest monthly fall since at least 1995.

Overall, the Sensex lost 726 points to close at 18,620, but hit a month-low of 17,448.71 in trade on Aug. 28. Fears that the United States would soon start rolling back its monetary stimulus also dampened investor confidence as it raised fears of foreign investors selling Indian shares.

Here are the top five losers and gainers of the month:

LOSERS

Bharat Heavy Electricals Limited (BHEL): Power equipment maker BHEL was the worst Sensex performer in August as its shares lost 25 percent of their value. The stock, which ended at 118.75 rupees, fell to as low as 100.35 rupees during the month.

On Aug. 5, shares fell sharply after the company’s quarterly profit dropped 49 percent, weighed down by lower sales in its power and industry businesses. The profit drop prompted Deutsche Bank to downgrade the company, while Morgan Stanley said they remain underweight on the stock.

Analysts are not very optimistic about the stock’s future. Of the 48 analysts tracking BHEL, 30 have a ‘sell’ or equivalent rating, data from Thomson Reuters showed.

Larsen & Toubro (L&T): Shares in India’s largest engineering and construction group were down nearly 15 percent, hitting a 52-week low of 678.10 rupees on August 28.

With the stock losing almost a third of its value in 2013, it’s been a tough year for L&T as a slowing economy has hurt infrastructure spending. India accounts for about 80 percent of the company’s sales.

Barclays recently cut its target price on the stock to 900 rupees, but upgraded L&T to “overweight”, saying the firm’s earnings cycle is heading closer to a trough and should rebound.

Mahindra & Mahindra (M&M): Shares of the auto company fell 14.4 percent in August, making it the third worst Sensex performer. With losses of almost 20 percent in the last two months, M&M in August fell much more than the BSE auto sub-index, which lost 3.5 percent.

On Aug. 13, India’s biggest utility vehicle manufacturer posted a better-than-expected 29 percent rise in quarterly profit. The company expects strong demand for its tractors to offset falling sales of its sports utility vehicles.

In a research note dated Aug. 19, Daiwa Capital Markets said: “M&M’s two core operative automotive businesses, which include utility vehicles (UV) and tractors, are witnessing a reversal in fortunes. Sales volumes for the hitherto fast-growing UV segment have slowed sharply, while tractor demand has seen a revival on the back of a good monsoon season.”

“We expect M&M’s UV business to remain under stress as a result of the demand shift towards compact SUVs.”

The company has plans to plans to invest 2 billion rupees to strengthen its current product line-up of trucks and buses and another 3 billion rupees to explore new products, it said earlier in August.

Oil and Natural Gas Corporation (ONGC): After losing 11.8 percent the previous month, August was another tough month for this state-controlled company as it lost 14.3 percent. Shares ended the month at 249.30 rupees after hitting a 52-week low of 234.40 rupees on Aug. 28.

Earlier in the month, the company reported a 34 percent fall in its quarterly profit, as higher write-offs for dry wells and depreciation, along with a one-time provision for a pension scheme, hurt margins.

On Aug. 25, ONGC said it had agreed to buy 10 percent in a gas field offshore Mozambique from Anadarko Petroleum Corp for $2.64 billion, as it looks to offset diminishing supplies from domestic gas fields.

Despite recent losses, experts are optimistic. Of the 52 analysts tracking the stock, 44 have a ‘buy’ or equivalent rating on ONGC, data showed.

Tata Power: Shares of the power company fell 13.8 percent in August, taking its losses for the year to more than 30 percent. The stock is currently at 75.80 rupees.

On Aug. 6, the Tata Power stock hit a 52-week low of 68.25 rupees, as the company posted an unexpected net loss of 1.15 billion rupees in the April-June quarter, hit by higher finance costs and foreign exchange losses.

GAINERS: Sesa Goa, which was recently included in the Sensex, was the star performer in August with gains of 46.44 percent. Tata Steel rose 27.14 percent, while TCS, Hero MotoCorp and Hindalco gained between 11.4 and 16.3 percent.

(Follow Aditya on Twitter @adityayk)

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •