The Tale of Two Resignations

It is interesting how stock prices react to the same news in different ways.

Today Infosys took a battering (down 3.43%). The purported reason was the resignation of B.Srinivas,President and Member of the Board.

B.Srinivas was the leading candidate to be the next CEO of Infosys and the markets didn’t like his leaving one bit.

The next resignation to hit the news was that of B.Sai Kumar, the Group CEO of Network 18.B Sai Kumar was with the Group for over 14 years and was instrumental in building it up.

Yet the stock is up 8% today and hitting 52 week highs.Sure,its results a few days back showed a “turnaround” of some sort.

But the real reason appears to be this piece of gossip:

Black Wednesday. Network18 employees must be quite bewildered by the happenings of 28 May 2014. First came the announcement that group CEO B. Sai Kumar had decided to call it a day after 14 years of nurturing and growing it along with Raghav Bahl and Haresh Chawla. Then came the news that even COO Ajay Chacko had decided to bolt for the door.

But this is just the tip of the iceberg, according to sources. Apparently, a senior management exodus is likely to hit the group over the next few days.  The group today issued a release  on the BSE stating that CFO RDS  Billy Bawa has already tendered in his resignation.  Among those who are tipped to follow  include : senior vice-president corporate affairs and company secretary Anil Srivastava and group general  counsel Kshipra Jatana.

Their departure is a precursor to the biggest announcement that is likely to come out: that of the exit of founding/controlling shareholder & managing director Raghav Bahl.

No one from the company was available for comment, despite several attempts by journalists.

Apparently, the entire exercise is part of Reliance Industries getting into the driver’s seat at Network18. The former is likely to make an announcement of a  direct public offer to buy out Raghav Bahl’s equity stake in the latter.-from IndianTelevision

Passive investing in India

The Nifty index is the most popular index used to track the Indian equity markets.

The index was launched on November 3, 1995 with a base value of 1000.

Today Nifty closed at 7300 levels.

If one held the Nifty tenaciously for all these years,one would have got a return of around 12% p.a.

The average dividend yield on Nifty stocks has been around 1%-2% but the gain would have been negated  by the impact cost.

The impact cost of holding the Nifty would have been very high.In all these years, there have been 151 changes to the Nifty-that’s an average of 8 changes every year !!

So passive investing in India is actually active investing-a momentum play on the biggest market cap stocks.Here the “active” role is played by the index maintenance folks.

On a different note, is 12% pa that great a return in the Indian  inflation environment of 10% to justify the time,energy,money spent by investors to get the next multi bagger?

10 Modi Multibaggers

Modi was selected as the BJP’s Prime Ministerial Candidate on 13 Sept,2013.

On May 2014,he was appointed by the President as the PM of India.

10 Stocks that gained the most in this period is listed below:

Symbol Close on 13 Sept,2013 Close on 20 May,2014 Gain
BFUTILITIE 138.7 709.75 411.72%
AHLUCONT 18 78.9 338.33%
VAIBHAVGBL 200.15 791.35 295.38%
NCC 20.1 78.85 292.29%
KEC 26.55 103.65 290.40%
CEATLTD 112.95 440.45 289.95%
GATI 24.9 96 285.54%
ADANIENT 141.05 533.15 277.99%
BEML 152.8 568.95 272.35%
TVSMOTOR 32.1 119.45 272.12%


Nestle India-Falling in a rising market

I find it interesting that in this bull market, one prominent stock making new lows is Nestle India.

Nestle India trades at high valuations-around 40 Times FY 2013 (Jan-Dec) EPS of 115 Rs.

Their profits for 31 March,2014 showed a drop of 7%.

The market didn’t like this one bit-a growth stock is supposed to keep growing.And hence the stock price is getting whacked.

Am reminded of Hindustan Lever-it sat out the entire bull run of 2004-2008 as it was expensively priced to begin with.