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Journalism of Courage
MUMBAI, JAN 6: Believe it or not, only five stocks in the Sensex list have posted positive returns while 25 stocks in the fancied index have posted negative returns during the last 12 months ended December 29, 2000. Out of these, the returns of only three stocks are above market interest rates (roughly above 16 per cent). This means that investors who had kept their money in bank fixed deposits would have at least have their capital safe and also get interest income.
"Investors who put money in these stocks were heavy losers. Then how come everybody is raving so much about the Indian markets, when in reality, 80 per cent of the investments made by mutual funds, FIIs or investors has led to severe erosion in the capital as the share prices of all major stocks have fallen. Long-term investors have clearly lost out in the race," said an analyst. Sensex (which is calculated on the basis of prices 30 stocks) has fallen by 20.65 per cent from 3972.12 to from 5005.82 during 2000 despite the February boom which took it to the 6150 level.
The worst five stocks — Zee Telefilms, Larsen & Toubro, Mahindra & Mahindra, Novartis and Telco — showed negative returns of 50 per cent plus. Contrary to the popular market belief that ICE stocks give maximum returns, it has been proved during the year that old economy stocks give far better returns. RIL has appreciated by 45.06 per cent, followed by 34.83 per cent appreciation by ITC. Nestle has risen by 27.64 per cent, BSES by 3.74 per cent and ICICI by 2.12 per cent.
The worst performance has been shown by the none other than Zee Telefilms owned by media baron Subhash Chandra. Its share price fell by 74.66 per cent and had to defer its ADR issue several times in the past. Competition from Star TV, Sony, SABe and other upcoming channels reduced Zee valuations as they were fast eating away the TRP ratings. In fact, in actual price performance the stock has crashed from a price of Rs 1092.80 on December 30, 1999 to Rs 277.00 on December 30, 2000.
An investor who was holding 100 shares of Zee in December 1999 has seen his portfolio depreciating from Rs one lakh to only Rs 27,700 by December 2000. Other new economy stocks like Infosys, Satyam Computers and NIIT have also performed miserably. Infosys has given negative returns during the last 12 months and is down by 21.39 per cent at Rs 5705.55 against Rs 7258. Similarly, Satyam computers has fallen by 26.50 per cent at Rs 323.50 against Rs 439.80. NIIT has taken a sharp plunge of 52.04 per cent at Rs 1590 against its previous 12-month close of Rs 3316.
See how long-term investors — which include mutual funds — have lost money in other `blue-chip’ shares. Larsen & Toubro follows Zee in the worst performers list with a loss of 64.80 per cent from Rs 555.90 in 1999 to Rs 195.65 by 2000. The infrastructure major failed to take adequate restructuring steps in time as a result of which the company started posting below average results. Similarly, low activity and reducing margins on tractor and jeep divisions failed to impress market participants on the M&M stock. The stock was down by 64.71 per cent from Rs 420 to Rs 148.20. The uncertainty about the listing of Mahindra-British Telecom also continued to overplay the stock. Several times in the past, rumours were floated in the market that MBT would be listed shortly. As a result, the stock would go up and then shortly fizzle out.
Telco small car project `Indica’ took its toll on the automobile major. The stock shed 56.27 per cent from Rs 201 to Rs 87.90 during the year. The stock continues to underperform as for the six months ended September 2000, Telco had reported a loss of above Rs 200 crore. Gujarat Ambuja Cement continued to underperform on account of acquisitions which had an adverse effect on the balance-sheet. The stock was down by 51.50 per cent at Rs 158.l1 against Rs 326.
For two-wheeler major Bajaj Auto, although the buy-back open offer price of Rs 400 was fully subscribed, the stock is quoted at a massive discount of Rs 230. With falling scooters sales and market shifting to mobikes, the share price moved down by 31.38 per cent. "Clearly, investors now prefer to invest on the short-term basis," said P V Chandran of Sozo Securities.
The much coveted IT major Infosys Technologies (which has been growing by more than 100 per cent in sales terms annually) has actually underperformed. The stock was down by 21.39 per cent despite posting growth. PE-derating of software majors and heavy defaults in dotcom and internet service providers continue to plague the IT industry which had its effects on Infosys.
In fact, the entire ICE sector has underperformed during this period. Shiv Nadar promoted NIIT has shown a whopping erosion of 52.04 per cent at Rs 1590.30 in absolute share performance. After ICE stocks, most fund managers had invested in pharma and FMCG counters. However, their fortunes have also been un-impressive. In terms of performance, Novartis, Glaxo, Ranbaxy, Colgative-Palmolive, Dr Reddy, Castrol, all have shown negative performance of between 10.44 to 59.09 per cent.
