The flare-up in the share price of Wipro is still fresh in the minds of traders. Wipro was among the first lot of stocks that went into compulsory paperless trading on January 3, 1999. Subsequently, the share price more than doubled to Rs 4,200 within two weeks. However, Wipro was more an exception than the rule. Of the other stocks which went into the paperless mode in the first round like ICICI, SBI, HDFC, L&T, IDBI, and VSNL, not one managed to outperform the market, despite a rally in the market.

Given the fact that among the 15 stocks to be included in paperless trading now there are only a few market favourites, it is unlikely that there will be a rally across the board. Besides, the market perception that FIIs will pick up thesestocks in the initial period of paperless trading also may not be correct. According to a few brokers, speculators who are betting on indiscriminate purchases by FIIs may be in for a surprise. The stocks that are more likely to see action are the ones that are currently outperforming the market like Tata Tea, Ranbaxy, Dr Reddys and TVS Suzuki. NIIT is also a potential gainer, though the stock closed marginally higher on Monday. NIIT has been a consistent market outperformer. There is also speculative hope for stocks like Asian Paints, which have performed in line with the market recently. On Monday, the stock outperformed the market, but closed lower.

Others, like refiners/energy stocks like Madras Refineries, HPCL, and GAIL are weighed down by their PSU status. It is unlikely that these stocks will see much of speculative activity. Only Cochin Refineries closed a couple of rupees higher on BSE; indicating the potential to gain.

Gujarat Ambuja: Fully discounted

Gujarat Ambuja is setting up threeplants with a capacity of 2 million tonnes each in Andhra Pradesh. The capacity expansion comes at a time when M&A is the in-thing in the cement industry. It is unlikely that the market will be excited about Gujarat Ambuja's expansion plans. The problem with the company is not volume growth, but the fact that cement prices in Mumbai and Gujarat (where it is a dominant player) are close to their peak. So, the obvious question is where will the consistent double-digit bottomline growth come from? It is already the lowest cost producer and cannot become a zero cost producer. Worse, Gujarat Ambuja is not able to sell the entire production of Ambuja Eastern Cements. The immediate growth will come from Sri Lanka, where the company is setting up a grinding unit, the despatches by Holder Bank from its Indonesian plants (which has already resulted in L&T shelving its proposed grinding unit project) notwithstanding.

In Andhra Pradesh, Ambuja has already opted for a mining lease (at Prodattar and Nadigudi). But, in acement industry securing mining rights is the most difficult job as the issue can get entangled in legalalities as a result of PIL petitions filed on filmsy grounds. Logically, Sri Lanka and the merger of Eastern Ambuja will be the top priorities for the company. Like L&T, Ambuja has never bought capacity simply because there are idle capacities going abegging. If it wants a presence in the south, it will have to be through a greenfield capacity.

This is because it has not been able to set up a jetty at Cochin for five years (the latest issue being "pollution" caused by the packaging unit) and, hence, it cannot transport cement from its plant in Gujarat and further. Besides, the price paid by a competitor for the Cement Corporation of India plant (for which Ambuja was one of the bidders) clearly indicates that the unit was valued in terms of keeping out competition. It does not make sense to offer exorbitant rates to acquire plants.

As the direct despatches to Sri Lanka will start later this month, theperception of a price crash in Sri Lanka due to despatches by Holder Bank will be tested soon. Although despatches will be marginal initially, the price realisation for Gujarat Ambuja will be adjusted for tax and duty-free coal import. The negative point is that all the positives (better performance due to higher prices) are already reflected in the price and an upside potential is limited.