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Amid the turmoil, second-quarter results sparkle

Investors, of course, hated SEBI for being a spoilsport which hit the Sensex to a sensational fall last week.

business Updated: Oct 21, 2007 21:43 IST
J Mulraj
J Mulraj
Hindustan Times

Market regulator SEBI ought not to be faulted for taking corrective action on the participatory notes (PNs) issue in order to protect investors from a harsher fall that would have ensued had the issue not be tackled now. For, over half the funds invested by foreign institutional investors (FIIs) are through the PN route, which SEBI calls a backdoor, because of the individuality of the investment and the anonymity of the source of funds.

Investors, of course, hated SEBI for being a spoilsport which hit the Sensex to a sensational fall last week.

When the indigenous 'badla' system was banned, in favour of the more liked 'futures and options' or derivative system, the reason touted was that 'badla' led to volatility. At no time in its history did it display the volatility now shown which really calls for a modification in its epitaph!

What events of the past week show is that the market had run ahead of itself, driven by liquidity. This liquidity could be genuine investment or suspect ones as in round-tripping of Indian money under cover of PNs, or perhaps hot money of whatever nature. Genuine investment would come, it was felt, through the front door, head held high. A cessation of PNs would not affect it. Once this action was taken, the market reverted, and will probably continue for a few more weeks, to revert to the mean. The long term story of India is good and this correction presents a buying opportunity. Normally, a proper correction should last a couple of weeks. Investment opportunities should be identified for an entry if the market dips further.

Last week saw some encouraging results for Q2 ended June. Reliance Industries showed a whopping 28 per cent increase in net profits to Rs 3837 crores, on a 6.3 per cent Arbitration delays hit investor mood

Judicial intervention in commercial disputes dampen foreign firms’ enthusiasm increase in income. It earned an enviable $ 13.6/mmbtu in gross refining margins, up from $ 9.1 in Q2 last year. Axis Bank (erstwhile UTI Bank) posted a whopping 60 per cent increase in net profit to Rs 227 crore, after having successfully made on overseas issue which brought down its cost of funds and gave capital to increase business.

First Published: Oct 21, 2007 21:41 IST