Larsen and Tourbo, Sterlite Industries, Hindustan Zinc, Maruti Suzuki, India Strategy
Sunday, March 06, 2011
The week gone by turned out to be an extremely good one for the market as benchmark indices surged 4.4%, the highest percentage gain after the week ended 5th November 2010. Nifty closed in green on all the four trading sessions of the truncated trading week. On Friday however, the benchmark encountered a stiff resistance in the vicinity of important resistance levels, viz. 200 Day Exponential Moving Average and immediate previous top placed at 5601 and 5599 respectively, and slipped more than a percent from the top of the day to close at 5538, still gaining 235 points or 4.4% compared to previous week.
Fed says companies starting to hike prices
In its latest Beige Book survey on the state of the US economy, the Federal Reserve said that manufacturers and retailers across all 12 of the central bank's districts are passing on rising commodity prices to consumers. "Manufacturers in many districts conveyed that they were passing through higher input costs to customers or planned to do so in the near future," the survey found. "Retailers in some districts mentioned that they had implemented price increases or were anticipating such action in the next few months," the report said.
Crude oil headed for its third straight weekly gain amid persistent fears over the ongoing political turbulence in the Middle-East and North Africa. At the same time, economic reports this week confirmed that the US economy was on the mend, stoking speculation of a pick-up in fuel demand from the world's largest energy consumer.
MphasiS has decided to reveal its financial numbers under the revenue heads as it used to do in the previous quarters. IT has also decided to publish data on average realised rate that it earns for onsite and offshore work. The company, which is in the midst of a corporate governance controversy, had stopped releasing this data since the last four quarters. It may be recalled that lack of adequate disclosures by MphasiS in the first quarter's financial statements had sent the company's shares sharply lower last week. The stock fell from Rs 627 a month ago, to Rs 450 as of Thursday's close on the BSE.
The Government is not contemplating deregulation of diesel prices as of now as inflation remains elevated, but it may have to consider the move if crude oil continues to rise, chief economic adviser to the Union Finance Ministry, Kaushik Basu said. "Diesel price deregulation is not inevitable...given the inflationary situation right now, we don’t want to do that," Basu told reporters at an industry summit organised by the Confederation of Indian Industry (CII).
India's infrastructure sector growth remained solid in January as compared to the previous month, as Petroleum Refinery, Cement and Electricity sub-segments saw improvement, data released by the Government showed. The core sector growth, as measured by the index of six key infrastructure industries, stood at 7.1% in January 2011 versus 6.1% in December, the Commerce & Industry Ministry said. The Index of six core industries, having a combined weight of 26.7% in the Index of Industrial Production (IIP), stood at 295.6 in January 2011. Infrastructure sector growth stood at 9.8% in January 2010. December's reading was revised to 6.1% as against the preliminary estimate of 6.6%.
The Government gave a green signal to the Banking Laws Amendment Bill that seeks to align the voting rights in banks in proportion with the equity shareholding. At present, the voting rights of a shareholder is limited to 1% in state-owned banks and 10% in private banks irrespective of the equity holding. According to reports, the Amendment Bill will now be tabled in Parliament for approval. The amendments, once approved by Parliament, will enhance the voting power of shareholders in line with the portion of equity held by them.
India's economy slowed in the third quarter of the current fiscal year from the previous two quarters, as output of Manufacturing and Construction fell sharply while Government spending too softened. The Gross Domestic Product (GDP) grew by 8.2% in the October-December quarter as compared to an expansion of 8.9% in the first and the second quarters. GDP had grown by 7.3% growth in the third quarter ended December 2009. The GDP growth during April-December 2010-11 stood at 8.6% compared to 7.4% in the corresponding period of the previous fiscal year. Manufacturing output grew by mere 5.6% in Q3 FY11 as against 9.8% in the second quarter and 11.4% in the same quarter a year earlier. Meanwhile, Agriculture, Forestry & Fishing output rose by 8.9% year-on-year in the final three months of 2010, faster than the 4.4% increase in the previous three months. Farm sector output had shrank by 1.6% in Q3 FY10. Construction output stood at 8% in Q3 FY11 as against 8.7% in Q2 FY11 and 8.3% in the year-ago period. Community, Social & Personal services output was at 4.8% in Q3 FY11 versus 7.4% in Q2 FY11 and 7.6% in Q3 FY10.
The Budget actually turned out to be a savior for the markets, at least for the week, with the key indices posting smart gains before finishing flat on Friday. At the moment, it is not clear whether the post-Budget rally will sustain or the market will soften a bit. either of the two scenarios could unfold. So, it would pay to stay cautious. The trend may be volatile and the indices will stay within a trading range. The Nifty is likely to trade between 5400 and 5650 in the short term.
The Union Budget 2011-12 aims to sustain economic growth, strengthen infrastructure, moderate the price rise, particularly of agricultural produce and reduce social imbalances through inclusive development. Presenting the Budget for FY12 in the Lok Sabha on Feb. 28, Finance Minister Pranab Mukherjee said that the budget is a transition towards a more transparent and result oriented economic management system in India. He said while developments on India’s external sector have been encouraging, continued high food prices have remained a principal concern. Mukherjee said that the trend revealed shortcomings in distribution and marketing system. The Finance Minister said that huge differences between wholesale and retail prices are at the expense of remunerative prices for the farmers and competitive prices for consumers.
The markets staged a strong comeback on the back of a populist Budget. The Sensex rallied 1,000 points during the week, from a low of 17,719 to a high of 18,737. The BSE benchmark index finally ended with a gain of 786 points at 18,487.
Among the index stocks, Mahindra & Mahindra zoomed nearly 14 per cent to Rs 676. Maruti and ITC also soared over 10 per cent each. HDFC, HDFC Bank, Bajaj Auto, Reliance Communications, Larsen & Toubro, Tata Motors, BHEL, Jaiprakash Associates, NTPC, Jindal Steel and Hindalco gained 5-9 per cent each. Reliance Infrastructure down 5 per cent was the only major loser.
Industrial machinery maker Atlas Copco (India) has made a voluntary offer to delist the company's shares from the BSE and Pune Stock Exchange.
The floor price for this offer is Rs 1,426 and the company has provided an indicative offer price of Rs 2,250. Current market price is Rs 2122.
With strong brands in its kitty, presence in both mid-market and premium segments, a wide network of dealers and low debt, lingerie maker Lovable Lingerie is a good, if high risk, bet on the niche textile space.
The company's future plans rely on heavy advertising spends, which will compress margins in the near-term. Capacity additions will fully come onboard only FY-13 onwards.
Efforts to resolve the oil-payment row with Iran, an expansion plan ahead of schedule, positive outlook for the refining sector, and the recent sharp fall in its stock price make MRPL an attractive bet for long-term investors. At its current price of Rs 58.6, the stock discounts its trailing 12-month earnings by around 11.7 times. This is lower than the trading multiple of other pure-play refiners such as Chennai Petroleum and Essar Oil, and also below MRPL's own historical-trading range.
The stock of Bartronics India has fallen over 61 percent in the last one year, on investors fears about heavy FCCB(foreign currency convertible bonds) repayment and also on concerns of the promoters pledging a chunk of their holdings. This apart its order-book position too has remained stagnant.