Tata Consultancy Services: Fail proof

It has been leading the charge in IT sector stocks,

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which have regained their lost glory on Dalal Street after a gap of almost nine years. In fact, even when world markets were in the grip of bears, with the Dow Jones index slipping every day in the US, TCS refused to fall, outperforming a strong bearish market. And as soon as global markets began to recover, the scrip started to gain sharply. Just after the general election results in May, the momentum gained pace. In other words, an investor who put in Rs 100 in a TCS share in January 2009 would have seen his investmentment triple, compared with a price of Rs 175 if it had been invested in the Sensex on the Bombay Stock Exchange. Given the thinking that Indian IT companies would be big beneficiaries when US companies raise their IT budgets, it is keeping alive the hope that business next year would be better than the one just gone by.

Tata Steel: Keep walking

The scrip was left high and dry when international steel prices crashed in 2007 soon after it took over UK-based Corus. The company became laden with debt from the acquisition, made worse by the problems faced by the banks that had lent money to the Tata company. In the first few months of 2009, the scrip under-performed the broader market indices, keeping pace with the market for a while before becoming an out performer in the last six months. Thanks to its strong domestic operations, the company has been able to stay afloat and is now gradually restructuring the corus business. The global slump in steel prices and demand forced the company to change the European operations including possible sale of plants in Spain, France and the Netherlands. While other companies would be worried about a strengthing dollar hitting commodity prices, Tata Steel is far better placed to cope.

Titan Industries: Watch out

The year was a rare dip for a scrip which has been outperforming the broader market indices for the last few year. In 2009, the scrip has been underperformed the broader indices. Our benchmark of Rs 100 in January would have become Rs 155 year-end compared with 175 for the Sensex. It has been very conservative in expanding its operations though it has ensured that margins remain protect in a sector that has been witnessing increasing competitions. The relative underperformance this year could be because of the already high institutional holding in the company. That could also be the reason why the counter did not receive a large share of inflows. The company has not expanded its capital even though the fundamental ratio of companies are improving clearly indicating better working capital utilisation. Once the issue about institutional ownership is taken care of, the scrip is likely to again outperform the broader market indices.

Tata Tea: Bitter taste

Yet another underperformer. And that too in a consistent fashion through the year. But the underperformance is in line with most of the other FMCG stocks which were doing well in the bearish phase of 2008, but could not sustain themselves when the bulls took control of the market. In case of the scrip, investment of Rs 100 in January would have turned into Rs 156 now compared with Rs 175 per cent for the Sensex. The company has been reducing its debt taken in long time back for acquisitions. The restructuring at Tetley, including putting a global sales and order processing system is expected to help the improve profits. While the company is entering into other segments of the beverage industry, both in domestic and international markets, it would be a while before the efforts show up in the bottom line and the scrip. Till, then the counter is going to remain under pressure in a strong bull market, though consistency of earnings would make it outperform a bearish market.

Trent: Balancing act

Amongst the first player in the organised retail sectors, the scrip has performed well in the second part of 2009. It was able to hold its head above the water for large part of the bearish phase in 2008. Even on the day the market crashed, it did not see a strong decline, though coming under pressure in early part of 2009.

Even at that, the company’s performance was at par with the market. It remained in this mode till August, when it acquired a sudden burst of energy and has outperformed the market since then. One reason for the lower performance earlier was the low liquidity of the scrip on the bourse. Because of this, any selling in the market led to sharp declines in the counter. But that appeared to be part of the panic hitting the market, rather than any major, delivery-based offload by institutions. It is amongst a few retail players who have avoided the trend of expanding mindlessly in 2007 and then closing shops a few months later.

Tata Motors: Moving ahead



Once considered the lead indicator of the market trend, the scrip remained under pressure in the early part of 2009. While in the second quarter it started performing in line with the broader market indices, it regained its star performer status only in July. In the last three months, the scrip has posted a gain of more than 80 per cent, making it one of the best performing stocks since the general elections. Investors have probably realised that the heavy and light commercial vehicle segments are going strong despite all the short term problems of an over-leveraged balance sheet. The leverage got skewed after Tatas acquired the highly-priced Jaguar and Land Rover. The company was able to raise Rs 4,200 crore from the domestic market in May ’09 even when the market was recovering. The issue’s oversubscription was an indication while the analysts are tense about the company’s balance sheet, but retail investors have reposed their faith in brand Tata.

Rallis India: Rural ruler



At one point or the other, this company operated in every possible sector from pharmaceuticals to electrical equipment. It took years for the company to restructure its operations and become a focussed player. Rallis is now the leading company in crop protection industry and has deep presence in rural India. After restructuring, the scrip has been performing well. Even during the bearish first quarter of 2009, the scrip was able to outperform broader market indices. An investment of hundred rupees at the beginning of the year would have become

Rs 285, which is far better than the

Rs 175 from Sensex. Though it is small as compared to other companies in the Tata stable, it is one of the finest players in the industry in which it operates. In the next few years it is going to lead an initiative in rural area retailing. While some apprehension was expressed that a bad monsoon would play spoil sport, yet there was not much of an impact. Traditionally, first quarter is not good for a company, but Rallies has been able to improve upon its margins during this period.

Tata Chemicals: Dark horse

Again a case which behaves more like a utility company, without being one, because government policies have a major bearing on its earnings. Government subsidy for fertiliser comes as a help to the companies, but it acts a damper on the price in a bullish market, though Tata Chem has been able to beat the index by a small margin. Again on the benchmark of Rs 100 invested in January, the amount at the end of the year would be Rs 198 compared with Rs 179 invested in BSE 100 index. After the company announced that it would produce a water filter aimed at the masses, the scrip has performed strongly. After a long period, the counter witnessed built-up of long positions and high rollovers indicating that the Street may be expecting some earnings surprise in the next few quarters. So, this one could be a dark horse from the Tata stable, as institutional holdings which have not see any major changes in last few years could see some fresh names added to it.

Voltas: Keeping cool

The scrip has been faring well on the bourse after the company shed its extra flab and focused on becoming a large player in the industrial air-conditioning market. The stock was fancied by some fund managers as a proxy play to the real estate boom. Their logic: if large malls are going to be built, Voltas’ order book is going to swell. It seemed to work and the scrip performed well during the 2008 bearish phase. Compared with the broader market indices, the scrip has been performing exceedingly well in the past seven months. On a full year basis, Rs 100 invested in Voltas at the beginning of the year would have touched Rs 283 compared to Rs 175 invested in BSE sensex. Though some concerns were raised earlier in the year when Dubai faced problem, as a part of its business comes from West Asia, the scrip was able to recover fast and resume its upward journey. Given the revival in construction activities in the domestic market, the coming year should be good.

Indian Hotels: Safe stay

It’s performance has been better than expected. The scrip was expected to underperform after 26/11 terrorist attack, but its performance has belied the Street’s projections. For the year, it has seen mixed trend, though. It was performing in line with the Sensex till October 2009, but has overtaken the index. Our Rs 100 benchmark for the company would be 221 compared with Rs 175 for the Sensex. The performance should improve as tourist inflows into the country, which has been slow due to recession are likely to improve over the next few quarters. The company has presence in both the high end and the budget hotel segments which ensures that the company has property in almost every part of the country. Although Tatas are not very comfortable with foreign institutional investors increasing their stake in Indian hotels, the FIIs have shown keenness to include the scrip in their portfolio because of its potential.

Tata Power: Lighting up

It’s among the few stocks from the group which have performed in line with the market, unable to outshine the broader indices this year. This is in contrast to its performance in the bearish phase of 2008, when it could avoid sinking like the other utility stocks. One reason for its lack lusture performance is that, traditionally, utility companies do not attract much attention during the first phase of any bull run. They often tend to under perform, because the possibility of any earnings surprise from utilities is very low. If Rs100 were invested in Tata Power in January 2009, it would have turned into Rs 173, just about the same as the Sensex. While there’s not much of a chance that we might see any drastic change in the current trend of the scrip, clarity on earnings for the next couple of quarter would help the stock stay stable. Compared though with its peers in the industry, Tata Power’s share is quoting at much more reasonable valuations.

Tata Communications: Call dropped

It has been the worst performing share from the Tata stable. It’s perhaps the only stock amongst listed companies of the group where investors would have lost money. A rupee 100 invested at the beginning of the year would have reduced the capital to a dismal Rs 68 compared with Rs 175 for Sensex. The divergence between Tatacom and Sensex became even sharper after May 2009, when the market went into strong bull phase. One reason for its under performance was the investor expectation that all Tata companies in the telecom sector would be merged into a single entity. That’s unlikely to happen soon. The lack of interest on part of retail investors is also due to a lack of clarity on the property which belonged to the erstwhile Videsh Sanchar Nigam Ltd, the earlier avatar of Tatacom. The company’s margins have been under pressure for a while and with no clear picture emerging on future earnings, the share is likely to remain under pressure.