It was however clear that a series of rumours were deliberately floated to hammer the market down. If in the process the markets lost a few tens of thousand crores in market capitalization, an equal amount has been gained by a set of bear operators. 

Finally, it took a few statements from the finance minister to bolster the sentiments of the market and trigger the recovery. Strictly speaking, none of the Finance minister’s concessions to the IT industry had any direct bearing on the profitability of leading stocks but still the market reacted favourably. This confirms the thought that the earlier fall itself was engineered by interested parties namely the bear syndicate.

Investors should note that whenever the markets move up quickly, SEBI steps in to stop the rally even before it gains momentum. However, when the markets go down, SEBI seem to have no urgency to act. In the present context, it appears that the increase of the daily circuit filter limits from 8% to 12 % helped the markets to fall faster and make the market more volatile. This should give better scope only for punters and not investors.

I hope that SEBI come up with some measures that clearly indicate that they are more "Investor friendly" than "Bear operator friendly". One of the measures they should immediately consider in this respect is to limit the downward circuit filter limit to 4 % while the upward filter remains at 12 %. This would slow down of the fall and prevent automatic sale of pledged shares by Banks as it happenned in the previous week. 

It is also imperative that a proper investigation should be ordered to find and punish those who instigated and benefitted from the spreading of wild rumours in the market about investigations on mutual funds, escalation of border tensions etc. Such investigation would be fruitful only if it is done by an agency other than SEBI. It would be preferrable if CBI is called in for this purpose with an investigatory scope which should include the role of SEBI in the rumour scandal.

Leaving this issue of restoring investor confidence for further debate of experts, let us look at the future investment prospects. As expected, old economy shares participated significantly in the latest rally. While these shares may not provide overnight fortunes like what many IT shares are capable of, they will provide stability to our portfolios and guard against extreme movement of markets and investors should quickly pick up some of these stocks before they hit a plateau.. 

Amongst such shares, Punjab Tractors stand out for its past consistency and future prospects. This professionally managed Tractor and Agricultural implements manufacturer has grown from strength to strength over the past five years as the accompanying table indicates.
 

Against an equity base of Rs 20.25 crores, the previous year profit works out to an EPS of Rs 62 which is likely to go up to about Rs 68 this year. The shares at the current price of around Rs 670 therefore represent a discounting of only around 10 times. Even though the drought conditions in some parts of the country could have a dampening effect on some of its operations this year, the current discounting is too low to be missed. 

The 52 week high of the shares at Rs 1539 also indicate that the share has the potential for substantial gains. The shares have already started moving up and added more than Rs 30 on the last day. Hopefully the trend would gain further momentum during the next week. The shares are however recommended for long term as the agricultural economy has a huge growth potential in the globalization era and should have a beneficial impact on companies such as Punjab Tractors.

Na.Vijayashankar
May, 6, 2000