Analysis of Metal, Pharma and Telecom Sector

Metal Sector

IndustryMetal Sector is a need of every developing and developed country as it provide basic raw material for the Production of Metal and Technology goods. In last 20 years, only few companies of India has achieved their targets of Better Financial numbers in every quater. SAIL, TATA STEEL and JSW STEEL are among the top Metal companies of India.

During the start of 2016 year, many steel companies faced over-low market capitalization and even some hits all time low. But after March 2016, Metal Stocks shows rally with so higher volume wave that lifts most of the stocks at 52 week high. Tata Steel, Vedanta and Hindalco were the most Active stocks which have shown comparitively higher Gains from lower levels. Both Public and Companies are happy from their Higher Returns and Market Value.

Company Lowest Price 2016 Highest Price 2016
JSW Steel 1,130 1,886
Tata Steel 211 440
Vedanta 58 233
Hindalco 59 185

The most Probably action behind this rally is Buying of FIIs/DIIs. Maybe Foreign or Domestic investors had buy only for short term. But it can also possible that Investment Institutions are very bullish on Metal Sector in future and have now decided to invest mainly in Metal related stocks. In past 6-7 months, price of commodities have increased sharply due to global demand. Therefore, I think Foreign and Domestic institutions are buying metal stocks for long term. And if it is true, Metal Stocks can give more than 50 to 60 percent return in future from present Market Value. Although, all this are imaginary things that could be reason.

The real face behind such a Great bounce back of metal sector can be anyone. So far, We don’t know exactly about the future story of Metal Stock’s. Most of the metal Stocks have now crossed their book value. I think Investors and traders who had made some position in metal stocks at lower levels and have earned great, should keep lowering their position in metal stocks at every price break. Not much quick, but they should keep lowering their position at every major peak.

Pharmaceutical Sector

Thermometer In last 6 years, Pharma Companies have gave such a great positive return to its investor’s. Pharma Index in last 5 years has gain more than 8000 points from levels of 4800. Few of the Pharma stocks that were trading around Rs.24 in 2010/2011 are now trading at Rs.400. Almost all pharma stocks are trading at higher market price as compare to their book value. Even, Some of them are trading at more then four times Greater value then their Book value.

Pharma Company Highest Price 2016 Present Price 24/12/16
Dr Reddys Labs 3,689 3,003
Lupin 1,911 1,445
Glenmark 995 925
Aurobindo Pharma 895 648
Sun Pharma 898 624

But in last 1 year, Pharma index has decreases more than 20 percent value from their highest value peak. It might be because of market correction. But Technical charts indicate that Pharma index has comparatively lost greater value then Nifty and Sensex. This is because of Profit-Booking by most of the Mutual Funds at higher Prices. Its true that Value and Financial numbers of most of the Pharma companies are on the path of Stable Growth. But as compare to other sector’s, Pharma Index is really at higher valuations.

My most important factor for buying or investing in any Stock is based on Valuations of Stock. Any Stock that has already given a wonderful return should not be bought. As buying at Higher valuation has remain always risky. Mostly that I have seen, Investors who had invested in 52 week high stock had not earned Great return. Therefore, I will advice to stay away from pharma sector for long term investment plan.

Telecommunication Sector

Antenna2016 was really a great depression time for Telecom sector after facing Major Problems of Call drop and Jio Launch. In Call drop matter, Supreme Court said that it would decisively reject the proposal of Penalty on every Call drop proposed by TRAI if telecom companies proves that Call drop is under 2 percent. By the end of matter, telecom companies got success and successfully proved that Call drop was under 2 percent to Supreme Court and achieved No restriction on Call drop.

Company Price during June 2016 Present Price
Bharti Airtel 367 295
Idea 120 71
Rcom 51 35
MTNL 23 18

In July, topic of launch of Jio in September became more active and gathered many News and Comments. Finally in September, Mukesh Ambani said that Jio will first work for its welcome offer launched on 5th September. Then, Jio expand its time limit of Welcome offer from 31 December to 31 march 2017 after having such a great response from public. This spread fear among the investors of Internet and Call Services providing companies. And this made 20 to 30 percent downgrade in levels of telecom companies.

Although, Jio offer would prominently affect the margin and Income of telecom companies. This would also increase huge competition which means less profit. But as the use of Digital goods will increase, Income of Different telecom companies would also increase even when there is one more competitor in same segment. And i think Companies would definitely compete actively with Jio. Companies like Airtel, Idea and Rcom have already revealed their Unlimited Call offer costs around Rs.150 which is really competitive against Jio. But Primarily, I would recommed to just take a trade in telecom stocks if you want rather than Investing in them for long term.

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One thought on “Analysis of Metal, Pharma and Telecom Sector

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