Monthly SIP Report
Sunday, July 04, 2010
The markets ended the volatile week with marginal losses. Global cues, especially from the US and the UK, dominated our markets. The Sensex touched a high of 17,795 early in the week and thereafter dropped to a low of 17,374. The index finally settled with a loss of 114 points at 17,461.
Major news for the week:
Reserve Bank of India hikes key rates by 25 bps
Bajaj Auto June sales up 63% yoy
May exports grow 35% to $16.1 billion
Foreign Direct Investment in May up 5.6%
Food inflation softens to 12.92%
Investors with a two-three year perspective can buy the stock of Samruddhi Cement Limited (Rs 475)- the demerged cement business of Grasim Industries that listed on the bourses last week.
The stock is a value pick within the cement sector, given its moderate valuation, control over the northern market, and low leverage that gives it the scalability to expand and add capacities.
When it rains it pours, or so has been the case for the public sector upstream oil companies, over the past couple of months. The downpour of good news has been heavy — the more than doubling in price of administered pricing mechanism (APM) gas, market-linked prices for additional gas from nominated blocks and the landmark reforms towards fuel price decontrol.
Investors may consider retaining the stock of JSW Steel in view of the company's proven execution ability, improved product mix and volumes which should enable it to capitalise on growing demand from the infrastructure, automotive and consumer durables segment.
The stage is set for road projects to take off after the new norms for bidding have been put in place. Well-entrenched players such as IRB Infrastructure Developers would emerge as the natural beneficiaries of road orders, after this move.
Well, the bulls and bears would have happily gone home at the end of a lackluster day and an eventful week, in which the Indian market emerged largely unscathed following yet another global scare. Every time the bears threatened to unsettle the bulls the key indices managed to bounce back. The same resilience of the Indian market could be put to test next week as market players will have to contend with the RBI rate hike, a mixed US jobs data and the RNRL-Reliance Power merger. Monday being a holiday in the US, world markets might struggle for direction. But, the Indian market will have plenty to play for as it gets ready for the next batch of quarterly earnings.
The boards of directors of Reliance Natural Resources Ltd. (RNRL) and Reliance Power Ltd. will meet on July 4, to consider a merger of the two anil dhirubhai ambani group (ADAG) companies. Earlier, media reports had suggested that RNRL and Reliance Power could merge, sending the shares of the two companies higher. The announcement is significant as it comes close on the heels of the two Ambani siblings rescinding a long-standing non-compete agreement, allowing them to expand into each other's sectors.
India’s food inflation slipped to 12.92% in the week ended June 19 as compared to 16.90% in the previous week. Inflation in the Food Articles group stood at 12.57% in the corresponding period last year. The index for 'Food Articles' group rose by 0.3% to 296.3. Inflation in the Primary Articles group too declined in the week under review to 14.75% from 17.6% in the previous week. The annual rate of inflation, calculated on point to point basis, for this group stood at 7.57% during the week ended June 20, 2009. The index for this major group rose by 0.2% to 301.8 from 301.3 for the previous week. Inflation in the Non-Food Articles group inched lower to 18.80%, from 18.86% in the week ended June 12 while the same was at -0.12% in the week ended June 20, 2009. The index for this group declined by 0.1% to 286.3. Inflation in the Fuel & Power group fell to 12.90% in the week ended June 19 from 13.18% in the preceding week. Inflation in this group stood at (-) 12.42% during the corresponding week of the previous year. The index for this major group remained unchanged at its previous week’s level of 370.2.
Worldwide IT spending is forecast to total US$3.350 trn in 2010, an increase of 3.9% from 2009 spending of US$3.225 trn, according to the latest outlook by Gartner, Inc. Gartner has lowered its outlook for the IT industry from the first quarter of this year when it forecast worldwide IT spending to grow 5.3%, primarily due to the devaluation of the euro versus the U.S. dollar since the beginning of the year.
Effective July 1, all banks operating in India started adopting a new system of base lending rate, replacing the old system of BPLR (base prime lending rate) introduced in 2003. SBI was the first to fix its base rate at 7.5%, while other large nationalised banks all fixed their base rate at 8%. HDFC Bank fixed its base rate at 7.25%, while ICICI Bank and Axis Bank fixed the same at 7.5%. The base rate for public sector banks is in the range of 7.5% to 8.25%, while that for private sector and foreign banks is lower by 50-100 basis points.
The following is the full text of the Monetary Policy and Liquidity Management Measures announced by the Reserve Bank of India (RBI) today.
On an assessment of the current macroeconomic situation, it has been decided to take the following monetary policy measures as a part of the calibrated exit from the expansionary monetary policy: