STOCKWATCH

The party’s over
SEBI gets tough with shady operators
The Securities and Exchange Board of India seems to have developed teeth, sharp ones at that. It is cracking down on shady stock brokers and market operators, charged with price-rigging, with a new-found vigour. For once, those used to abusing the system by openly rigging share prices of some companies find themselves in a hot soup.
A detailed investigation by SEBI has proved that the share prices of SVA Udyog, Magan Industries, SVL Capital, Amit International, Rahul Merchandising and Adeshwar Cotton were indeed rigged.
The culprits have been booked by SEBI under the Unfair and Fraudulent Trade Practices Act. Significantly, Rs 20 crore has been confiscated from the brokers by the BSE and Rs 17.52 crore of it is being transferred to the Investor Protection Fund. SEBI’s daring action comes at a time when there is still no dearth of admirers at the Indian bourses of ‘Big Bull’ Harshad Mehta--he seems to have escaped scot-free despite his proven illegal activities that fuelled an artificial rally at the BSE and culminated in massive losses for thousands of small investors. SEBI’s latest initiative should serve as a warning to unscrupulous operators.
But ever since the advent of the cash-rich Foreign Institutional Investors into the Indian market, the clout of many big-time operators has diminished. They are all forced to restrict their antics to little-known cash scrips.
For a change, even the mighty Reliance group is feeling the heat from the investigating agencies. The share price of its flagship company, the Reliance Industries, has been on the decline for some time now. But things have been moving differently at the counters of yet another heavyweight, the State Bank of India. It has once again begun to display signs of upward mobility. However, investors would do well to avoid buying SBI scrips with their eyes closed. The recent interest in the shares of the ‘Bank’, as it is called in the market, had nothing to do with its fundamentals--it was entirely because of it entering the ‘no delivery’ period.
Investors would do well instead to focus their attention on fundamentally solid scrips like BSES, Tata Power and Carborundum Universal, each of which has a tremendous long-term potential.
Meanwhile, with the budget announcement round the corner, the FIIs seem to have shut shop and appear to be waiting in the sidelines, watching the events as they unfold. An unpleasant but inevitable event that unfolded recently was the steep hike in the prices of petroleum products. It is bound to have an indirect impact on the bottomlines of several companies.
However, this price-hike had been discounted at the bourses as was evident from the way the Bombay Stock Exchange Sensitive Index bounced back after an initial slump following the announcement.
All eyes are now trained on Union Finance Minister P. Chidambaram, whose reputation as a reform specialist precedes him, as he gets ready to announce the budget on July 22. Will Chidambaram be able to live up to the expectations of the market? Only time, nay, the sensex will tell!
--ASHOK KUMAR
(The author is a financial consultant in Mumbai.)
SCRIPS TO BUY
INFAR INDIA
A leading manufacturer of gynaecological equipment, it has expanded into veterinary products and diagnostic kits. The company is currently negotiating with Akzo Nobel, USA, for setting up facilities for manufacturing its products in India. Infar has a satisfactory track record and its products have an encouraging prospect in the medium to long term.
SHANTI GEARS
This manufacturer of industrial and other gear products had recently completed an expansion-cum-modernisation programme of its facilities. The funds were raised through a rights issue in 1992. The company also has a foundry division where forgings, heat treatments and castings pattern-making are made.
Well-known for its adherence to quality control measures and delivery schedules, Shanti Gears enjoys a good demand for its products. The company has satisfactory prospects and investors could consider including it in their portfolios.
VITARA CHEMICALS LTD
Manufactures and markets bulk pharmaceuticals and allied chemical products through a nation-wide marketing network. Vitara has ventured into the manufacture of penicillin-based drugs, such as ampicillin, cloxacillin and amoxycillin. The company has a satisfactory financial track record with encouraging prospects. Investment in this scrip could prove remunerative in the medium to long term.
IVR CONSTRUCTION
A leading player in the industrial civil constructions segment, IVR Constructions has undertaken several projects for leading corporates like HPCL, Balmer Lawrie and AP Rayon. IVR Construction fared very well last year when it recorded an increase of 176 per cent in its net profits.
It has a strong order book position and is poised to consolidate its position in the industry. Could yield decent returns in the medium term.
MARKET TALK
A group of brokers based in south India are recommending investment in the shares of Wheels India. They are highly optimistic about its prospects.
A well-known fund manager advises investment in the shares of Ranbaxy labs. He is predicting a surge in its share price soon.
A Mumbai-based bull operator is aggressively accumulating the shares of Centak Chemicals. A portfolio adviser is also recommending his clients to grab its shares at the current price level.
Tata Honeywell is being actively traded by market operators at the Bombay stock exchange. Its price is expected to spurt shortly.
Grasim Industries is generating considerable interest among institutional investors and market operators.
Considerable trading has been reported at the counter of ITC. Investment in this scrip is being strongly recommended by a broker.
SCRIPS ON THE SLIDE
RELIANCE INDUSTRIES
Its share price had recorded a sharp downswing recently because of the on-going probe into the group’s involvement in the switched shares’ imbroglio. The drop in prices of its key products has also contributed to the fall in its market price.
TAMILNADU NEWSPRINT
Existing share-holders are advised to avoid panic selling of Tamilnadu Newsprint despite the steep fall in its price. The company’s fundamentals and prospects are encouraging in the light of the boom in the newsprint industry. Satisfactory gains in the medium to long term can be expected.
SECTOR WATCH : BANKING
Safe and sound
The banking sector has been revolutionised by the relaxations allowed by the Reserve Bank of India in the last five years. Yet, the sector is not exactly hot with investors, what with the rising cost of funds, slow growth rate of deposits and the possibility of rising non-performing assets.
However, the increasing demand for credit, marked shift towards savings in financial assets, a stable GDP and industrial growth trend and steady deregulation, are expected to enhance the prospects of the banking sector.
Major Players:
STATE BANK OF INDIA
The indisputable market favourite with the largest volume of deposits and profits. However, despite a satisfactory performance during 1995-96, this scrip appears to have lost some ground because of its alleged indirect involvement in the urea scam.
KARNATAKA BANK
It is engaged in broad-basing its business mix through non-fund activities. It is also concentrating on strengthening its operational efficiency. Karnataka Bank’s prospects are bright as it has a steady financial track record and its reserve position is strong.
BANK OF MADURA
Was the target of a take-over bid in the recent past. Bank of Madura has a network comprising 254 branches--the majority of which are located in Tamil Nadu. The bank is projecting an EPS of Rs 35 for 1995-96 when it hopes to consolidate its position in the industry.
FEDERAL BANK
Has the highest number of non-resident clients and was established in 1930. The bank has a strong presence in non-fund based activities like merchant banking, issue of guarantees and letters of credit. The bank can be expected to post enhanced bottomlines as it has ambitious plans.
HDFC Bank
A joint venture between HDFC and Natwest Bank of the United Kingdom, HDFC Bank is in the process of gaining a foothold in the industry. HDFC has plans to establish itself in all areas of banking. Considering the state-of-the-art technology at its disposal and its sound management, its long-term prospects are satisfactory.
OTCEI/NSE NEWS
The National Stock Exchange Index has remained rather steady in the last couple of weeks despite the upheavals on the political front. More importantly, there has been a sharp increase in trading volumes too. Marketmen attribute the positive investor sentiment to expectations of a few favourable announcements in the forthcoming budget. Ironically, the sentiment that prevailed at the Over The Counter Exchange of India has been negative with the OTCEI composite index continuing to slide downwards.
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