Week Closes Marginally Higher
DSIJ Intelligence / 24 Aug 2012
The week ended with minor positive changes as there were no major triggers for the markets. Both the broader indices closed higher with the Sensex up by 0.52 per cent and the Nifty closing higher by 0.38 per cent. Nifty hovered around the 5,400 mark through the week but finally ended slightly lower. This week the market was open only for four days on account of a public holiday for Eid on Monday. The market had no major cues even as it awaited the CPI numbers which were slightly lower, thus providing some relief. As per media reports, the monsoon parliamentary session also faces washout threats. The session will last till September 7 and investors and traders post the session will expect Finance minister P Chidambaram to announce some bold reforms to bring the economy back on the growth track.
The consumer price index (CPI) was in single digit this time at 9.86 following the softening trend of the wholesale price index (WPI). Further, the CPI inflation for the month of June was revised downwards by 9 basis points to 9.93 per cent. Even with the WPI and CPI softening a bit one should not expect the RBI to cut the rate in its next monetary meet. The RBI released its annual report yesterday which stated that inflation is likely to remain sticky at around 7 per cent with upside risks emanating from a deficient monsoon. Going forward, the priority should be to bring down the twin deficits to support potential growth even if it means a slower pace of recovery in the short run.
The June quarter result season is almost over as most of the companies have declared their performance. The numbers were clearly disappointing as they reflected tepid growth. From the data of the 2,428 companies which we analyzed after the regular adjustment of excluding the PSU oil marketing companies, India Inc. saw a consolidated topline growth of over 12.28 per cent while net profit has witnessed a marginal growth of 2.24 per cent on a YoY basis. The situation worsens if we compare results on a sequential basis. Our cover story in the most recent issue of Dalal Street Investment Journal provides more insights.
Most of the global markets also ended the week on a lower note. The U.S. markets’ major indices like Dow Jones, S&P 500 and Nasdaq closed lower in the range of 0.2 to 1.5 per cent. This was in the wake of media reports which quoted a Federal Reserve official saying that the possibility of another round of quantitative easing is not likely in the near term. This dampened investors’ confidence with the belief that the economy may face headwinds in terms of growth.
The European markets also ended lower with major indices like FTSE, CAC and DAX closing downwards in the range of 1 to 1.50 per cent. This was due to the disappointing PMI data. Further, Bloomberg reported that the markets had moved southwards prior to the meetings between German, French and Greek leaders to discuss Greece’s second bailout program. Meanwhile, Britain’s economy shrank less than first feared in the second quarter but remains stuck in a double-dip recession. Its GDP fell by 0.5 per cent in the June quarter compared with the previous quarter, according to the Office for National Statistics.
The Asian markets also ended the week lower with major indices like Nikkei, Shanghai and Hang Seng closing lower by more than 1 per cent. The Chinese market ended lower after a Bloomberg report stated that major companies like Maanshan Iron & Steel Co and Shanxi Coal International Energy Group Co had reported weaker earnings. Also, HSBC and London-based Markit Economics released their preliminary reading of China’s manufacturing purchase managers’ index (PMI) for August that indicated a nine-month low. The flash PMI reading came at 47.8 for August as compared to the final reading of 49.3 in July 2012.
Back home, the BSE IT Index was the leading one, closing higher by more than 3 per cent. At this time of uncertainty investors have preferred defensive bets. The FMCG and healthcare indices closed higher by 1.85 and 1.11 per cent respectively while the realty index was a leading loser, closing lower by 2.59 per cent. Oil & gas, capital goods and consumer durables’ indices closed lower by more than 1 per cent.
Among the individual stocks, Astrazeneca Pharma closed the week higher by 15 per cent at Rs 1,887.7 despite the news that Anandh Balasundaram had resigned as the managing director and a member of the board of the company. Other stocks like GSPL, Auorbindo Pharma and Nestle closed the week higher in the range of 5 to 11 per cent. Ranbaxy’s shares moved northwards and touched a 52-week high of about 6.75 per cent to Rs 549.8 after the after the company agreed to withdraw applications of 27 drugs filed with the USFDA. Shree Cement moved higher by 5.55 per cent to Rs 3,450 after the company posted robust financial numbers.
On the other hand, IFCI plunged by 16.67 per cent to Rs 29.25 after media reports stated that the government had exercised its option to convert Rs 923 crore worth of debentures into equity with immediate effect. Opto Circuit closed the week lower by 13.67 per cent at Rs 127.3 after credit agency ICRA suspended the rating assigned to its Rs 5.38 billion (USD 97.08 million) facility and cited concerns about the company’s stretched liquidity position. Other stocks like Adani Port, PFC, HDIL, etc also closed lower in deep red.
Bharti Airtel generated a lot of buzz this week, moving southwards to its lowest level in nearly six years. The stock plunged by 5.34 per cent to Rs 248 due to rating agencies like Morgan Stanley, Goldman Sachs and Standard Chartered downgrading the stock for its disappointing quarterly earnings. Further, Credit Suisse also downgraded the stock on fearing that the company would face intense competition from RIL Infotel Broadband which plans to offer cheaper data and voice services soon.
Coal India’s shares zoomed by almost 5 per cent to Rs 366.90 after the company decided to buy back its own shares, paving a roundabout way for its majority shareholder, the government, to meet its disinvestment target. The near-monopoly coal producer will seek shareholder approval at its upcoming annual general meeting (AGM) to be held on September 18, 2012.
In conclusion, we expect the market to remain volatile for the next week ahead of the August expiry which is due on August 30. Further, the June quarter GDP numbers are due on August 31 and this may keep the market nervous. ICRA estimates the GDP for the June quarter to be at 5.1 per cent, below 5.3 per cent as in the March quarter. Further, it has revised its forecast for GDP growth for FY13 to 5.7 per cent from the previous expectation of around 6.4 per cent. On the global front we have the Chinese manufacturing PMI numbers and some key data like industrial production and unemployment rate from Japan. One should also watch out for any developments in the U.S. and European markets which could direct the flow either way. Our advice to investors is to remain cautious.
| Benchmark Indices | |||
|---|---|---|---|
| Index | 17-Aug-12 | 24-Aug-12 | % Change |
| SENSEX | 17691.08 | 17783.21 | 0.52 |
| NIFTY | 5366.3 | 5386.7 | 0.38 |
| Hang Seng | 20116.7 | 19880 | -1.18 |
| Nikkei | 9162.5 | 9071 | -1.00 |
| Shanghai | 2114.69 | 2092 | -1.07 |
| Dow Jones* | 13250 | 13057 | -1.46 |
| S&P 500* | 1405.17 | 1402 | -0.23 |
| NASDAQ* | 3062.39 | 3053 | -0.31 |
| Bovespa* | 59445 | 58511.55 | -1.57 |
| FTSE* | 5834 | 5777 | -0.98 |
| DAX* | 7011 | 6950 | -0.87 |
| CAC* | 3481 | 3433 | -1.38 |
| * closing till Thursday | |||
The consumer price index (CPI) was in single digit this time at 9.86 following the softening trend of the wholesale price index (WPI). Further, the CPI inflation for the month of June was revised downwards by 9 basis points to 9.93 per cent. Even with the WPI and CPI softening a bit one should not expect the RBI to cut the rate in its next monetary meet. The RBI released its annual report yesterday which stated that inflation is likely to remain sticky at around 7 per cent with upside risks emanating from a deficient monsoon. Going forward, the priority should be to bring down the twin deficits to support potential growth even if it means a slower pace of recovery in the short run.
The June quarter result season is almost over as most of the companies have declared their performance. The numbers were clearly disappointing as they reflected tepid growth. From the data of the 2,428 companies which we analyzed after the regular adjustment of excluding the PSU oil marketing companies, India Inc. saw a consolidated topline growth of over 12.28 per cent while net profit has witnessed a marginal growth of 2.24 per cent on a YoY basis. The situation worsens if we compare results on a sequential basis. Our cover story in the most recent issue of Dalal Street Investment Journal provides more insights.
Most of the global markets also ended the week on a lower note. The U.S. markets’ major indices like Dow Jones, S&P 500 and Nasdaq closed lower in the range of 0.2 to 1.5 per cent. This was in the wake of media reports which quoted a Federal Reserve official saying that the possibility of another round of quantitative easing is not likely in the near term. This dampened investors’ confidence with the belief that the economy may face headwinds in terms of growth.
The European markets also ended lower with major indices like FTSE, CAC and DAX closing downwards in the range of 1 to 1.50 per cent. This was due to the disappointing PMI data. Further, Bloomberg reported that the markets had moved southwards prior to the meetings between German, French and Greek leaders to discuss Greece’s second bailout program. Meanwhile, Britain’s economy shrank less than first feared in the second quarter but remains stuck in a double-dip recession. Its GDP fell by 0.5 per cent in the June quarter compared with the previous quarter, according to the Office for National Statistics.
The Asian markets also ended the week lower with major indices like Nikkei, Shanghai and Hang Seng closing lower by more than 1 per cent. The Chinese market ended lower after a Bloomberg report stated that major companies like Maanshan Iron & Steel Co and Shanxi Coal International Energy Group Co had reported weaker earnings. Also, HSBC and London-based Markit Economics released their preliminary reading of China’s manufacturing purchase managers’ index (PMI) for August that indicated a nine-month low. The flash PMI reading came at 47.8 for August as compared to the final reading of 49.3 in July 2012.
| Sectoral Indices | |||
|---|---|---|---|
| Category/Index | 17-Aug-12 | 24-Aug-12 | % Change |
| Broad | |||
| MIDCAP | 6,157.96 | 6,119.21 | -0.63 |
| SMLCAP | 6,615.25 | 6,574.78 | -0.61 |
| BSE-100 | 5,352.71 | 5,368.08 | 0.29 |
| BSE-200 | 2,165.91 | 2,169.81 | 0.18 |
| BSE-500 | 6,765.45 | 6,774.19 | 0.13 |
| Sectors | |||
| AUTO | 9,535.47 | 9,596.74 | 0.64 |
| BANKEX | 11,961.03 | 11,872.28 | -0.74 |
| CD | 6,373.79 | 6,306.03 | -1.06 |
| CG | 10,047.91 | 9,928.62 | -1.19 |
| FMCG | 5,205.13 | 5,300.13 | 1.83 |
| HC | 7,338.52 | 7,420.13 | 1.11 |
| IT | 5,611.78 | 5,797.80 | 3.31 |
| METAL | 10,327.46 | 10,422.28 | 0.92 |
| OIL&GAS | 8,500.52 | 8,397.77 | -1.21 |
| POWER | 1,927.28 | 1,919.72 | -0.39 |
| PSU | 7,094.54 | 7,129.70 | 0.50 |
| REALTY | 1,632.85 | 1,590.52 | -2.59 |
| TECk | 3,230.89 | 3,290.66 | 1.85 |
Back home, the BSE IT Index was the leading one, closing higher by more than 3 per cent. At this time of uncertainty investors have preferred defensive bets. The FMCG and healthcare indices closed higher by 1.85 and 1.11 per cent respectively while the realty index was a leading loser, closing lower by 2.59 per cent. Oil & gas, capital goods and consumer durables’ indices closed lower by more than 1 per cent.
Among the individual stocks, Astrazeneca Pharma closed the week higher by 15 per cent at Rs 1,887.7 despite the news that Anandh Balasundaram had resigned as the managing director and a member of the board of the company. Other stocks like GSPL, Auorbindo Pharma and Nestle closed the week higher in the range of 5 to 11 per cent. Ranbaxy’s shares moved northwards and touched a 52-week high of about 6.75 per cent to Rs 549.8 after the after the company agreed to withdraw applications of 27 drugs filed with the USFDA. Shree Cement moved higher by 5.55 per cent to Rs 3,450 after the company posted robust financial numbers.
On the other hand, IFCI plunged by 16.67 per cent to Rs 29.25 after media reports stated that the government had exercised its option to convert Rs 923 crore worth of debentures into equity with immediate effect. Opto Circuit closed the week lower by 13.67 per cent at Rs 127.3 after credit agency ICRA suspended the rating assigned to its Rs 5.38 billion (USD 97.08 million) facility and cited concerns about the company’s stretched liquidity position. Other stocks like Adani Port, PFC, HDIL, etc also closed lower in deep red.
Bharti Airtel generated a lot of buzz this week, moving southwards to its lowest level in nearly six years. The stock plunged by 5.34 per cent to Rs 248 due to rating agencies like Morgan Stanley, Goldman Sachs and Standard Chartered downgrading the stock for its disappointing quarterly earnings. Further, Credit Suisse also downgraded the stock on fearing that the company would face intense competition from RIL Infotel Broadband which plans to offer cheaper data and voice services soon.
Coal India’s shares zoomed by almost 5 per cent to Rs 366.90 after the company decided to buy back its own shares, paving a roundabout way for its majority shareholder, the government, to meet its disinvestment target. The near-monopoly coal producer will seek shareholder approval at its upcoming annual general meeting (AGM) to be held on September 18, 2012.
In conclusion, we expect the market to remain volatile for the next week ahead of the August expiry which is due on August 30. Further, the June quarter GDP numbers are due on August 31 and this may keep the market nervous. ICRA estimates the GDP for the June quarter to be at 5.1 per cent, below 5.3 per cent as in the March quarter. Further, it has revised its forecast for GDP growth for FY13 to 5.7 per cent from the previous expectation of around 6.4 per cent. On the global front we have the Chinese manufacturing PMI numbers and some key data like industrial production and unemployment rate from Japan. One should also watch out for any developments in the U.S. and European markets which could direct the flow either way. Our advice to investors is to remain cautious.
| Key Global Indicators | |||
|---|---|---|---|
| Index | 17-Aug-12 | 24-Aug-12 | % Change |
| Gold | 30,143 | 30,770 | 2.08 |
| Silver | 53,737 | 56,520 | 5.18 |
| Crude Oil (Brent) | 113.82 | 114.55 | 0.64 |
| Crude Oil (Nymex) | 95.17 | 95.81 | 0.67 |
| Currency Rate | |||
|---|---|---|---|
| Index | 17-Aug-12 | 24-Aug-12 | % Change |
| USD | 55.82 | 55.37 | -0.81 |
| EURO | 68.93 | 69.47 | 0.78 |
| GBP | 87.52 | 87.79 | 0.31 |
| JYP (per 100) | 70.22 | 70.41 | 0.27 |
| Volumes (Rs.cr) | ||
|---|---|---|
| Date | BSE | NSE |
| 16-Aug-12 | 2188 | 10166 |
| 17-Aug-12 | 2155 | 10262 |
| 21-Aug-12 | 1954 | 9357 |
| 22-Aug-12 | 2042 | 8899 |
| 23-Aug-12 | 1951 | 10110 |
| Institutional Turnover (Rs / Cr) | ||
|---|---|---|
| Date | FII | MF |
| 14-Aug-12 | 280 | 99 |
| 16-Aug-12 | 135 | 80 |
| 17-Aug-12 | 323 | 34 |
| 21-Aug-12 | 212 | -33 |
| Total | 950 | 180 |
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