Sensex shines, Gujarat cos dazzle!

If Sensex danced its way at a new high of 21,033.97 on Wednesday, not many small and mid-cap companies on stock exchanges could revel similarly on the indices as they still hung around three to four year low. However, in case of many Gujarat-based companies, which despite being very far from the all-time high, could show the benchmark indices and Bombay Stock Exchange’s sensitive index, who too ruled the bourses in the last two months. They even outshone Sensex, which dazzled at its closing on Wednesday 60 days after touching its year’s low on August 28.

In two months, Sensex grew by 20.55% from 52-week low of 17,448.71 on August 28, 2013 till closing at 21,033.97 on October 30, 2013. During that period, many state-based companies witnessed appreciation in their stock price from 21% to 76%.

Sintex Industries, which was struggling for posting growth in net profits due to depreciating currency, has seen 76% appreciation in the stock price in last two months. Similarly, the scrips of Dishman Pharmaceuticals, Gujarat Gas, Arvind Ltd and Adani Enterprises have increased by 50% to 60% since August 28.

Fundamentally, there is no reason of more than 60% rise in stock prices of mid-caps, particularly Gujarat-based companies in last two months, director of TradeBulls, Asif Hirani said. “These companies may have been driven by positive sentiments in the stock market. But with 5% GDP growth, rising inflation and other challenges, there is no reason for stock market indexes to rise.

The growth is totally based on FIIs buying from DIIs. We suggest investors to stay away from mid-cap companies as of now as we don’t know how long the growth will sustain,” he said.

Along with Gujarat government PSUs, the pharmaceutical companies and engineering companies of state too gave better returns in two months. While stock prices of Elecon Engineering and Alembic Pharmaceuticals increased by over 40%, state-owned companies including GMDC and GSFC witnessed appreciation of 30%.

The current rally in Sensex or Nifty is pushed by IT, pharmaceuticals and FMCG companies, said fund manager – PMS, Angel Broking, Phani Sekhar. “The appreciation in stock prices is seen only in bluechip companies particularly in Sensex and Nifty. These are driven by liquidity pumped in by FIIs. Apart from these scrips, there about 40% to 50% of companies have been traded at three to four year low. There are many such scrips, away by 80% to 90% from their peak,” he said. 

Even small and mid-caps joined the rally on Wednesday, said head of research IIFL, Amar Ambani. “The rally of Sensex closing to new high was led by the defensives like healthcare and FMCG stocks. Even the telecom, power and realty stocks were among the major contributors. For a change, the mid-cap and the small-cap stocks participated in the rally on Wednesday,” said Ambani.