| . | Rumours have still been the predominant factor in the Indian stock markets. Last week there were several rumours floated by interested parties to create temporary fluctuations in the prices which active operators could take advantage of. While these midday rumours settle down before the following day and don’t harm ordinary investors, rumours floated on medium term issues tend to harm investors by creating temporary fall in the market prices and forcing weak investors into taking panic decisions. For example there is this rumour in the market place that the sudden aggressiveness of BJP allies is linked to the possibility of midterm polls in the medium term. There is no way such rumours can be either denied or confirmed. Once the rumour gains a critical momentum, investors have to react to the change in the market sentiment whether they believe in the rumour or not. The trend of the third quarter results that have been announced indicate that the net profit of a sample of 510 companies have climbed by 19.2 % in Q3. Even though this may not give the full picture of over 7000 companies that are traded in Mumbai alone, it does indicate a trend of improving profitability. The industry segments that have been doing particularly well are the Software, Pharmaceuticals and the Consumer Goods (FMCG sector). These industries will continue to do well in the coming months since the general economic situation is on the way up. The positive outcome of the Indo-USA trade negotiations, which could lead to lifting of sanctions in the next six months, can only add to this positive sentiment. Considering the generally positive outlook moderated by the expected Budget presentation, which may involve higher taxes, as well as the rumours of mid term elections that may not be cleared until April, investors can stick to the above three sectors. Even in these sectors, companies, which have a strong Brand value behind them, are the companies, which will be least, affected by any political uncertainties or the levies in the Budget. One such company that needs attention is the Biscuit major Britannia Industries. The third quarter results announced by the company recently indicate an increase of 22 % in sales and 33 % in profit after tax. The annualized EPS has grown from around Rs 15 to around Rs 21. This was on top of a good performance in the year 1997-98, which recorded a sales growth of 13 % and profit growth of 62 % at net level.
The key strength of Britannia is in its Brand. This has helped the company in launching new products successfully from time to time and maintaining its market share in a growing market even against many regional competitors springing up from time to time. This should sustain its growth in the future also. Investors may however note that the share prices of Britannia at Rs 1130 are currently at a 52-week high and minor drop in prices in tune with the drop in the market sentiments (if it occurs due to the Budget or otherwise) cannot be ruled out. Any such drop if it occurs would however be temporary and the shares are expected to appreciate by around 25 % in the next six months making it a good candidate for a wise portfolio. Na.Vijayashankar February 6, 1999 | . | ||||||||||||||||||||||||||||||