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Foseco rides on Castrol ruling

S. Vaidya Nathan

THE past fortnight has been a nightmare for traders who seek to profit from short-term price changes. Small prices moves through a trading day and indices locked in a narrow band has been the dominant theme. With rolling settlement in place, speculative surges in frontline stocks seems to have gone out of the window at least for the present. But some of the more interesting price moves in an otherwise lacklustre market are:

A few media stocks, which were outside the ambit of rolling settlement, attracted attention in the post July 2-period. Balaji Telefilms and Mukta Arts have been in the forefront.

These two stocks are now on a trade-to-trade basis and on voluntary rolling settlement mode. These are likely to be prime candidates for rolling settlement sooner than later. Since going on a trade-to-trade basis, the uptrend in Balaji Telefilms has bee n capped and the stock is now on the retreat.

In contrast, the Mukta Arts' stock, which had been on a steady decline on concerns over Yaadein, has seen an accelerated decline. The stock has close to 33 per cent in the last eight trading sessions.

The stock of Foseco (India) has ridden piggy-back on a Mumbai High Court ruling on Castrol. The ruling has rejected the appeal of BP Amoco against an order by the Securities and Exchange Board of India (SEBI).

The SEBI order, directing BP Amoco to make an open offer at Rs 350, is now valid and there may be no choice unless the legal process is extended by appeals.

Following this ruling, BP Amoco's position in respect of an open offer requirement for Foseco has weakened. This is another company where there is a change in control following global level developments involving BP Amoco.

SEBI had directed an open offer (which is now more likely to go through) at the average price of last six months or prices as of March 2000. Since the latter would mean a price of around Rs 170 plus interest at 15 per cent, the Foseco stock has firmed up, The stock has gained 40 per cent in the last nine trading sessions. Till there is a concrete announcement, further upside from the present price levels may be limited.

The stock of Industrial Development Bank of India (IDBI) has suffered further declines and it is now below the Rs 20 level. Fresh concerns over asset quality, fund flow positions and income levels have triggered a downtrend in the stock. This is more or less in line with the downtrend in the stocks of ICICI and IFCI.

Notable gainers/losers: Some of the other stocks that have gained in a sizable manner are Cochin Minerals, ITW Signode, Clariant, Thomas Cook, Larsen & Toubro, Cummins, CG Glass, Zee Telefilms, Wipro and Bayer Diagnostics.

The uptrend in CG Glass and ITW Signode are driven by impending open offers. The rise in the price of the Zee Telefilms' stocks seems to be linked to the promoters' efforts to place 25 million shares with foreign institutional investors.

Whether this will be sustained is subject to doubt once the placement fervour wears off. Stocks such as Alembic Chem and Panacea Biotech have been prominent on the losers list.