Be Se­lec­tive with Ship­ping Bets De­spite Re­cov­ery, Say Ex­perts

The Economic Times - - Smart - Palak Shah & Biswa­jit Baruah

Mum­bai: Shares of Ship­ping Cor­po­ra­tion of In­dia, Great East­ern Ship­ping and Es­sar Ship­ping surged up to 30% in less than two months even as Baltic Dry In­dex (BDI), the bench­mark for dry bulk ship­ping freight, jumped 131% in about two-and-a-half months as sup­ply fell due to scrap­ping of ves­sels, and de­mand rose led by the on­go­ing har­vest sea­son in South Amer­ica.

Ship­ping com­pa­nies are hop­ing to achieve health­ier op­er­a­tional num­bers if freight rates re­main firm. How­ever, an­a­lysts said in­vestors should re­main se­lec­tive about which stocks to pick among the pack.

“In­vestors should not draw ma­jor con­clu­sion from surge in BDI be­cause the global trade is strug­gling for re­cov­ery,” said G Chokkalingam, man­ag­ing di­rec­tor, Equinomics Re­search & Ad­vi­sory. “Great East­ern Ship­ping can be con­sid­ered as good long-term in­vest­ment.” WhileBDIhasjumped131%fro­man all-time low of 290 in Fe­bru­ary to 671 on Wed­nes­day, pun­ters are bet­ting that the in­dex will touch 900-lev­els by May-end. Dur­ing the global fi­nan­cial cri­sis, BDI had col­lapsed from an all­time high of 11,793 in May 2008 to 663 by De­cem­ber of that year.

“A sharp rise in the in­dex in­di­cates that de­mand has picked up and hence, freight rates are go­ing up,” said Sudip Bandy­opad­hyay, CMD, In­di­trade Cap­i­tal. “There is a huge ca­pac­ity constraint in the ship­ping sec­tor. So, any pick-up in de­mand is bound to fuel freight rates and stock price rally in ship­ping com­pa­nies.” An­a­lysts are of the view that though a fur­ther rise in BDI is likely, the up­side could be limited be­cause there isn’t much trade tak­ing place as Chi­nese econ­omy is slow­ing down and not much ex­ports are tak­ing place from the re­gion.

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