The current market condition does not require any reasoning. It is completely going topsey turvey. Investors of late have turned very impulsive. It is evident when a single appointment of Raghuram Rajan who ultimate does not have any magic wand and needs to go a long way to prove his mettle, raised exuberance among market participants. D Subbarao who had taken up the mantle immediately after the Lehman Brothers collapse suddenly turned villain. I wonder, what kind of rationale is driving investors to do so??? This is simply an act of irrationality. However, markets will only get direction only after a stable government be it Modi led NDA or Rahul led UPA. Any emergence of Third Front will have volcanic eruption from investor community.
From: An admirer of the blogger....
Nothing seems to be working in this market for even the smartest of traders. Rather, the law of averages seems to be catching up with even those who had managed make a tidy profit in these troubled times. In the last couple of months, first Wockhardt and then Financial Technologies caused untold grief to some of the smartest players in the game. The drop in these stocks was so swift that it did not give a chance to these players to exit in time. And now another respected name on Dalal Street, reverentially known as the ‘Professor’, has been caught on the wrong foot. Professor and his close circles had accumulated huge chunks of Ranbaxy over the last month, taking advantage of the near 50-percent decline in the stock between mid-May and early August this year. The decline was triggered by the company’s admission of wrongdoings related to drug safety, manufacturing of adulterated drugs, as well as data and documentation falsification in the US in May, and agreeing to pay a fine of USD 500 million to settle these charges. The sell-off led to the stock becoming under-owned (by institutional investors), providing a good opportunity for traders looking to control it. The buying (in cash as well as derivatives) by Professor and his group lifted the stock nearly 85 percent since August, even though there was no meaningful improvement in the company’s fundamentals. It is not sure if the buyers were merely taking a punt on the stock, or loading up in anticipation of some positive announcement by the company.
But the latest import alert on the Mohali plant by the US FDA has sparked a stampede in the stock, catching the bulls unawares.
The Ranbaxy stock is down around 26 percent at Rs 338 this morning after having touched a low of Rs 297.
The USFDA move is certainly a negative for the company, which now has only one plant to supply drugs to the US market. But the plunge in the stock has more to do with panicky bulls unwinding their long positions built up over the last one month.
“There were no direct sales to the US from Mohali as of now, so EPS wise there is no hit to numbers yet. However, several ANDAs had been filed from Mohali, which will now take time for approval,” brokerage house Cit wrote in its note to clients.
What do you think? Is Ranbaxy a good bargain at current price?