| It's interesting to note that cross holdings in oil companies came about when the government wanted to sell part of its holdings in these companies; and instead of selling it to the public, it made the oil companies themselves buy minority stakes in each other. |
| But this has worked out tremendously to the advantage of the oil companies, considering the multi-fold jump in share price of all oil stocks. |
| For instance, IOC's investment of Rs 2,470 crore is now worth Rs 10,068 crore, a 307 per cent appreciation, while ONGC's investment of Rs 1,617 crore now has a market value of Rs 5,066 crore. |
| The cash inflows will no doubt bring welcome succour to the companies' heavy capital expenditure plans. Besides, it's also very likely that there would be a large interim dividend as had happened in December last year "" the higher profitability in FY03 had resulted in an interim dividend of Rs 2,700 crore by the oil companies. |
| The amount of interim dividend may be higher this time around. Apart from the capital gains, even earnings are expected to grow at a fast pace. Since retail prices have recently been increased, it will lead to higher marketing margins. |
| Secondly, prices of petrol and diesel have appreciated by around 30 per cent and 14 per cent respectively over the last three weeks. |
| Coming back to the sell-off plans, the public issues of these companies will be among the largest in the history of India's capital markets, although the issue will be for just 10 per cent in ONGC and GAIL each and 12 per cent in IOC. |
| Meanwhile, expectations of huge interim dividends is driving these stocks up. ONGC has shown an appreciation of over 16 per cent this month, while GAIL and IOC have appreciated 21 per cent and 12 per cent during the same period. |
| Markets at an all-time high? |
| The Nifty ended the week at 1778, which is an all-time closing high. True, the highest level reached by the Nifty intra-day is 1818, so it's still a little early to celebrate. |
| But it needs to rise just 2 per cent more to reach that level, so it's safe to say that the Nifty is very near its all-time highs. But what's more important to know is whether that means the markets itself are at an all-time high? |
| Since the Nifty comprises just the top fifty stocks in the markets, it makes more sense to look at a broader index such as the S&P CNX 500 to see if the entire market is at an all-time high. The S&P CNX 500 gives a different picture, as it's almost 18 per cent lower than its all-time peak of 1759. |
| Does that mean that heavy market cap stocks in the Nifty, on an average, have rallied more than the rest of the pack? Not exactly. Since April, the Nifty Junior, which represents 50 large cap stocks that are not part of the Nifty, has jumped 150 per cent, much higher than the 82 per cent rise in the Nifty. Besides, the CNX Midcap 200 index has gone up by 158 per cent in the same period. So, what gives? |
| The markets had reached its all-time high in February 2000, when the bull run was dominated by tech stocks. Some of the favourite stocks of those days, like GTL or Himachal Futuristic, now trade at a fraction of the levels reached in early 2000. |
| For instance, GTL, which had reached a peak of Rs 3550, now trades at just the Rs 80-levels. Himachal now trades at Rs 18, compared to an all-time high of Rs 2550. There are plenty more such examples. Some of these stocks are part of the S&P CNX 500, and the reason for the relative underperformance compared to the Nifty. |
| But for these stocks, which had reached ridiculously high levels during the tech bubble, the markets (as tracked by the S&P CNX 500) would be at all-time highs. |
| With contributions from Mobis Philipose and Sameer Ranade |
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