The Securities and Exchange Board of India's narrow objectives have been achieved in banning of short sales. The net outstanding positions on the sell side have come to nil (in some cases like Thermax this figure was achieved earlier last week, which was reflected in the rapid rise in the stock). Even as of Thursday in counters like the State Bank of India and a couple of others such as Reliance the ratio of outstandings sales to outstanding purchases had declined drastically, especially since the outstanding purchases had shown almost no change, in relation to what it was during the prior settlements. While nil outstanding sales was the desired level by the regulatory authorities the huge outstanding purchases are very unsettling as far as the markets are concerned.In Thermax's case the outstanding purchases are in excess of two lakh shares, in SBIs case it is 14 lakh shares and in case of Reliance it was 42 lakh shares towards the end of the week. The other stocks have similar figures. Now, this has twoimplications for the market. One, there is absolutely no depth in the market in the sense that less than five per cent of outstandings can be liquidated on any single day, which makes life very risky for long buyers in the market. Second, with no short positions left to liquidate, long buyers are faced with the real prospect of facing upto sellers for delivery, which will force a market crash in the coming week or a payments crisis. Hence the move to allow short sellers is being greeted with some relief as the market will have some depth to cushion a fall, even though the restrictions have been lifted with some lag and is effective July 7.
Camlin Ltd
The imposition of excise duties on writing inks by the latest union budget will not be very welcome by Camlin Ltd, the country's leading manufacturer of writing inks, retailed under the `Camel' brand. The just concluded financial year has been a slightly better one for the company with a growth rate, in revenues, of 16.36 per cent. The compound averagerate of growth for Camlin has been just 13 per cent for the last six years, which had further slowed down to 7 per cent for the past two years.
The company improved its operations after emerging from a year of losses in 1995-96 but the performance in the second half of the year has been a little disappointing with operating margins dipping to 5 per cent from 8.3 per cent in the first half (overall margins have increased to 6.8 per cent against 5.4 per cent last year). In addition, the company made a loss of Rs 0.13 crore, owing to extraordinary expenditure relating to its employees. The slowdown in sales in second half held the company back from meeting its expected revenues for the year of Rs 140 crore.
The company (Camlin's distribution network can be a major attraction for any potential joint venture partner) recently broke off its joint venture with Faber Castell for manufacture and marketing of stationary and writing instruments citing differences over capital investments. This should be a gooddecision as the company can stay focussed on building its Camel brand.The stock has performed quite badly in the last two months dropping from a high of Rs 62 to Rs 46.50 a fall by 33 per cent.
German Remedies
While a re-rating is on in pharma stocks a select few have been marked out for special attention from punters and from some foreign funds. German Remedies is one such stock and as the date of its annual results come closer the speculation surrounding the net profit figure gets more heated. Against a net profit of Rs 18 crore that was talked about a week earlier, the number being passed around in certain circles is closer to Rs 21 crore.
The German Remedies stock once again reflects this optimism. In addition to substantial higher earnings for the recently concluded financial year with the hope that the growth momentum may be maintained for the current year, there are hopes of a liberal issue of bonus shares.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
