Share buyback: How to trade NHPC, Power grid

Also, is time ripe to book profits in IT stocks and what capital goods sector stocks should you be buyiung

The purpose of share repurchase or buyback is to support the sliding share prices, boost investor confidence or even as defense against any future hostile takeover. Two much talked about public sector power companies NHPC and Powergrid are going for share buybacks, later this week. In the run up to the buyback, Devangshu Datta, shares his views on how to trade the counters ahead of their share-buybacks.

NHPC shares plummeted over 10 per cent in past one month as compared with the Sensex's 3 per cent fall in the same period. The scrip had also underperformed the market in past one quarter, up 7.95 per cent as compared to Sensex's over 10 per cent surge.

NHPC plans to buyback around 123 crore fully paid up equity shares of Rs 10 each at a price of Rs 19.25 per share, aggregating Rs 2368 crore from the open market. The buyback offer will close on 12 December 2013.

NHPC made the share buy back announcement on Friday, 22 November 2013 post market hours.

SmartInvestor : After a rally yesterday, markets are lacklustre in today's trading session. Do you think investors should be booking profits instead?

Devangshu Datta : No clear trend. I would suggest that investors wait - if the nifty falls below 6075 it could be time to book profits. Otherwise we may see a flat session without much net movement

SmartInvestor : Are we witnessing a beginning of a rally in broader markets. Your view on mid-caps and small-caps and top picks there?

Devangshu Datta : Difficult to say. Market too heavily driven by FII liquidity inflow/ outflow to commit to smaller stocks. Would prefer to wait for more clarity on tapering.

SmartInvestor : Are valuations just to enter capital goods stocks at these levels. Your top picks there and levels to watch out?

Devangshu Datta : Bhel has been range trading -could be a good buy for the long-term in the 135-140 zone (about 6-7 % below current). L&T, Crompton, ABB, Thermax are all good businesses but I suspect you can get them cheaper in next short-term downturn

SmartInvestor : Is time right to book profits in IT stocks?

Devangshu Datta : No, the industry is in an uptrend and the next time the USD rises, even if temporaril y, there will be a price rise across the sector.

SmartInvestor : Power grid and NHPC share buyback is lined up in later part of the week. How are you approaching the stocks?

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