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FE Investor Bureau
New Delhi, Oct 13: The wild movement witnessed in the Sensex today has a precedence in December 5, 1996. Both the days, the index fell below the crucial psychological level of 2790 points before staging a smart recovery to close above 2800 points. Today, the panic-selling in the market saw the Sensex being pushed to an intra-day low of 2785, but bounced back to close at 2832 points. Similarly, on December 5, 1996, the Sensex touched a low of 2735, before closing higher at 2812 points.
A study of the heavyweight index stocks shows that over fifty per cent are currently quoting close to their December 5, 1996, levels. These include bluechips like Reliance Industries, Bhel, Bajaj Auto, L&T and Hindalco.
Consider this: Cement major ACC, which has been quoting at over Rs 1000 for the past one year, has now crashed to Rs 920. On Decmber 5, 1996, the scrip was trading at Rs 912. While 30 cent of the stocks in the study are quoting below the 1996-level, only two scrips are trading at a premium -- HLL andITC.
For contrarians, the time may be ripe to step in for the kill. They could invest in heavy-weight index stocks which are close to their 1996-levels and are backed by strong fundamentals. Assuming the Sensex crosses even the 3000-mark, they can hope to earn a decent return of 20-25 per cent. And, a turnaround could well be round the corner. According to marketmen, there have been 13 occasions when the Sensex has fallen by over 100 points this year and on 10 occasions, it has bounced back to give a decent appreciation within a week.
Reliance, which today touched a low of Rs 102 on BSE, was trading at Rs 88-90 in December 1996. If adjusted for bonus, the price only marginally higher than today's level. Same has been the case with Bajaj Auto. The scrip was trading at Rs 498.5 on December 5, 1996, and today it touched a low of Rs 511. Even BHEL, which had sharply risen from Rs 150 to more than Rs 400 after it caught the fancy of institutional investors, has fallen to Rs 211. This is close to the December1996-level of Rs 198.
The star performers, however, are HLL and ITC. HLL currently trades nearly Rs 1000 higher than the December 5, 1996, close of Rs 770. Same is the case with ITC which is still twice its December 5, 1995, value. ITC was trading at Rs 271 as against today's close of Rs 670. Infosys, which will make its debut in the Sensex soon, was a non-entity on the bourses in 1996. Today, the scrip quotes at Rs 2188.
The laggards include State Bank of India, steel major Tisco and auto makers Telco and M&M. The erstwhile bluechips have now been battered on the bourses and currently trade at a steep discount to the December 5, 1996, level. Tisco, which used to trade at Rs 152 then, has now fallen by 83 per cent to Rs 83. Telco, too, has dropped from Rs 311 to Rs 122.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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