Modi boost helps Sensex rise 8 pct in May, Sesa jumps 51 pct

May 30, 2014

By Ankush Arora and Sankalp Phartiyal

A road sign stands next to the Bombay Stock Exchange building.Indian shares rose sharply and scaled new record highs in May, with the benchmark index rising above 25,000 points on hopes of an economic revival after pro-business Narendra Modi became India’s new prime minister.

The BSE Sensex touched a life high of 25,375 points on May 16, the day results for the five-week election gave Modi’s Bharatiya Janata Party a clear mandate to govern Asia’s third-largest economy. In May, the index rose 8 percent, its best monthly performance since October.

The BJP and its allies stormed to power by winning 336 of the 543 seats in the Lok Sabha, riding on Modi’s promises to create more jobs and push India back on the high growth path. Stocks rallied across the board, while the Indian rupee also touched multi-month highs.

After the sharp rally, Deutsche Bank downgraded Indian stocks to “neutral” relative to other global emerging marketing, saying valuations appear “very stretched” against lower GDP growth. Credit Suisse said appointment of new ministers was an underwhelming development for India’s markets.

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

GAINERS

SESA STERLITE: Shares of the iron ore producer jumped 51 percent in May and emerged as the best performer in the 30-share BSE Sensex.

Sesa, a unit of London-listed Vedanta Resources, reported last month a five-fold increase in its March-quarter net profit. The better-than-expected result followed conditional reversal of a 19-month long ban on mining in Goa, India’s top iron ore-producing state. Sesa extracts all of its ore from the state.

However, not all are bullish on the stock. In a research note dated May 23, Centrum reiterated its ‘sell’ on Sesa Sterlite with a target price of 185 rupees. On Friday, the stock closed at 279.50 rupees

NTPC: The company’s shares closed 37.5 percent higher during the period, after losing 3 percent in April.

Earlier this month, Supreme Court said NTPC, India’s top power producer, can cut supplies to electricity distributor BSES in New Delhi, if arrears are not paid by the end of May.

On Friday, Deutsche Bank raised NTPC’s target price to 135 rupees from 128 rupees; rating on hold. The stock closed 5 percent higher at 159.85 rupees on Friday.

A man looks at a screen across the road displaying the Sensex on the facade of the Bombay Stock Exchange building in MumbaiBHEL: The stock ended as the third-best Sensex performer this month, closing nearly 34 percent higher. It ended the month at 242.15 rupees.

On Thursday, the power equipment maker reported a fall of 43 percent in its March-quarter net profit.

In a research report on May 29, Barclays maintained its underweight rating on BHEL with a price target of 217 rupees. Last year, the stock slumped more than 20 percent.

TATA POWER: In May, the company’s stock rose 33 percent, after registering a fall of nearly 8 percent in April.  The stock ended the month at 103.85 rupees.

In 2014 so far, the shares have gained 17.8 percent.

Standard Chartered wrote in a note on May 29: “We expect a short term consolidation in the range of 95 to 106. However, longer term technical indicators are turning increasingly positive and the stock is likely to rally higher.”

On Friday, the utility firm reported a net loss of 1.45 billion rupees in the March quarter on higher operating costs incurred at its Mundra power plant.

On Friday, the stock closed at 103.85 rupees.

COAL INDIA: Shares of world’s top coal miner surged 27.2 percent, their third consecutive monthly gain.
India’s fifth most valuable company on Thursday announced a fall of 18 percent in its March-quarter profit, a fourth straight decline in quarterly profit.

Last week, Reuters exclusively reported Prime Minister Narendra Modi was considering restricting the state-controlled mining behemoth, in a bid to arrest output decline.

The Kolkata-headquartered company produces more than 80 percent of India’s total coal, but often fails to meet output targets.

“Despite sharp run‐up in the stock price during last three months, we continue to maintain our positive stance on  the  stock  given  its  structural  play  on  reforms  to  be  undertaken  by  new government,” Prabhudas Lilladher said in a research report on May 29.

LOSERS

Infosys was the top Sensex loser this month, closing 7.4 percent lower.  Drugmakers Sun Pharma fell 3.8 percent and Cipla lost 3.5 percent. Wipro dropped 3.3 percent and mortgage lender HDFC fell 2.3 percent.

(Editing by Aditya Kalra; Follow Aditya on Twitter @adityayk , Sankalp @sankalp_sp and Ankush @Ankush_patrakar | Disclaimer: This article is website-exclusive and cannot be reproduced in any form without permission)

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