An analysis of the stock traded on the Bombay Stock Exchange leaves the impression that the bell-curved price movements have vaporised the gains of almost all stocks during 1997. During this period a gain in the market cap of Rs 1,51,068 crore was almost neutralised by Rs 1,49,854 crore decline in market cap in the second phase.
The market cap of January 1, 1997 is considered the first bottom with the BSE sensex at 3260.4. The market cap of August 5, 1997 has been considered for top when the BSE sensex reached an all-time high of 4548.02. The second bottom has been on December 12 when the BSE sensex reached 3329.27.
An analysis of the stock prices show that all industry-wise gainers, when the market was in top gear, became losers, when the market hit the bottom. The industry-wise market cap of January 1 has been compared with market cap of August 5 to identify at the gainers. The market cap between August 5 and December 12 has been compared to pick the losers.
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The price trend and sensex movement were directly proportional during these periods. At the first instance, when the BSE sensex gained 39.5 per cent to touch all time high at 4548.02 on August 5, the market cap of traded scrips shot up by 37.7 per cent. At reversal, while sensex declined by 26.8 per cent to touch 3329.27, the market cap of traded scrips decline almost identical 26.6 per cent.
During the first phase of bullish sentiment, 75 industries registered price appreciation between 1-120 per cent while 38 other reported a bearish trend with prices falling between 1-39 per cent. The bearish trend saw the market price of all industries declining between 1-58 per cent. The industries which did not participate in the first phase of boom, registered further losses.
Though there are no industry gainers in the second phase of the market, nineteen industries witnessed a rise in market capitalisation if the market prices between January 1 and December 12 are taken in to consideration.
Software scrips which registered handsome gain of over 120 per cent in the first phase remained static at August 5 level. Leather stocks lose their shine a little bit with a 13.4 per cent decline in market cap in the second phase after gaining 104 per cent in the first phase.
Electrical equipment scrips shed 30.3 per cent in bearish market compared to 95.5 per cent gain in the bull run.
The losers in the first phase of market witnessed a further erosion in the market cap in the second phase.
The recession hit sponge iron industry witnessed a price erosion of 38.4 per cent in the first phase and further 43.9 per cent in the second phase.
Packaging, including polyester and bopp films, mining, carbon black, mini steel, diamond and jewellery and pollution controlled equipment registered a further decline in market cap in the second phase of the market.
Such a decline in the bearish phase is not unfounded for these industries.
The first half results for 1997-98 almost reveals this trend. Sponge iron industry which is at the bottom of the stack reported a net loss of Rs 14.73 crore in the first half of FY98 compared to a net profit of Rs 1.87 crore in the first half of FY97. Packaging polyester and bopp films registered a sharp decline in net profit by 83 per cent.
A decline in market cap in bearish phase for certain industries after the substantial gain in the first phase also to be linked with the financial performance of the industry.
Office equipment industries with net loss of Rs 4.50 crore in first half of FY98 reported a 53.9 per cent decline in market cap compared to a rise of 72 per cent in the boom phase. Aluminium, Auto sector, steel, white goods, ferro alloys, chemicals, cement which are facing recessionary conditions reported a sharp decline in the second phase.