However, apart from this one-time cash flow, there is little reason to getexcited over CG, despite the size of the inflow. The reason the market lostinterest in the CG stock is because of the dismal performance in the secondquarter. Against expectations of an improvement in performance (the stockhad rallied considerably against this anticipation) the company reported aRs 30 crore loss.

Things are not going to change very fast from that loss-making situation,given that the reasons underlying the loss are still valid. The company hadsuffered from the fact that some valuable orders were cancelled. Theposition has not improved much since then. The Sujana Power project, atTuticorin, which accounted for 35 per cent of its order book has still notattained financial closure. The delay in the implementation of the projectwill have a severe impact on its prospective revenues.

A real and sustainable impact on the stock will only come when the ordersstart flowing in and more importantly, if it returns to making profits thisyear. However, the proposed restructuring of its business into threeseparate companies could unlock some value in its power and industrialsystems business which has the most profit potential and which will betransferred to one company. The consumer products business will betransferred to another and the informatics business will be spun off into athird company.

Market volatility
Activity in the stock market is being marked by increased volatility. Forweeks, the stock market was obsessed with the December 15 deadline, by whichtime FII activity was expected to cease. The fact that the custodians willbe shut a little before December 24 lends credence to the fact that FIIactivity will cease before that time. This has some implications for themarket in general. What could happen to the market in the absence of theFIIs, who are largely seen as a stabilising force, was evident from themanner in which stocks behaved in the near absence of FII buying on December15.

The absence of the big funds tends to allow the bigger operators to controlthe market. The sharp volatility seen during the morning and afternoon ofthat day was a result of this control. Popular stocks in the software andtelecom sector were subjected to the third degree, beginning the day at theupper circuit level and then being brought down to the lower circuit, beforerising again. The obvious strategy being sell in large quantities at theupper circuit and buy in similarly large quantities at the lower circuit.This happened across the board in stocks like Himachal Futuristic, DigitalEquipment and Pentafour Software.

Aaron Chaze