Nifty stocks defy buy on rumours, sell on news dictum

Mumbai, Nov 14 | Updated: Nov 15 2005, 06:09am hrs
Market seems to be maturing fast, if the stock price movement after Q2 announcements is of any indication.

The investors have defied the popular saying in the market, "Buy on rumours and sell on news."

An analysis of the data shows that the investors are becoming informed investors. Of the 50 stocks of S&P CNX Nifty of the National Stock Exchange (NSE), 38 stocks (76%) have gained up to 23% in 15 days, after the date of the announcement of the company's Q2 results. This number was 33 (66%) in the Q1 of the current fiscal.

The stock price of Wipro gained marginally by 0.37%, whereas National Aluminium Co Ltd (Nalco) was up maximum by 23% after the announcement of the second quarter results.

The players have become cautious while investing before the announcement of the financial results. Only six stocks (12%) of the Nifty's 50 stocks were up on the expectations of a good Q2 performance 15 days before the announcement results. While in July, 41 Nifty stocks (82%) gained in anticipation of good Q1 results.

An analyst with a domestic brokerage said the direction from the regulator preventing the companies from news leak before the announcement of results has arrested buying on the speculation.

The Nifty consists of 50 good companies, which not only follows all regulatory norms but also practices good corporate governance.

Interestingly, following the announcement of Q2 results, around 30 stocks (60%) lost steam 15 days after the announcement, when compared to the stocks price 15 before the results.

Market analysts attributed this for the volatility of market in October, the month of the announcement of the second quarter results.

The FIIs were the netsellers at Rs 3,800 crore during the month in the market. And, Nifty lost 10% during the entire month.