Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Positives overweigh the negatives - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 28, 2009

    Positives overweigh the negatives

    Indian indices saw a marginal change during the week. The benchmark index, the BSE-Sensex, rose a modest 0.5%. But that was relatively better off than its neighbour - China saw its benchmark index plunge by 7.9%. Despite the tumultuous times, Japanese markets put on a decent show by rising 2.1% during the week.

    Markets in the US and European region were marked by ubiquitous declines. While Germany saw the biggest decline of 4.3%, US's benchmark index fell 4.1%. Markets in France and the UK too saw declines.

    Inflation for the week ending February 14 fell further to 3.36% as compared to 3.92% in the week ending February 7. The numbers were lower due to price cuts in fuel, primary articles and the manufactured goods. With inflation within the Reserve Bank of India's (RBI) comfort zone, the possibility of cut in key rates continued to remain high.

    The government during the week announced that the 4% excise duty cut across-the-board will continue beyond March 31, 2009. Also the excise duty on cement would be reduced to 8% from 10%, while service tax will be cut from 12% to 10%. Further, customs duty exemption on naphtha extended beyond March 31, 2009, to provide relief to the power sector. The measures would surely help the industries to mitigate at least some of the pressure of the economic slowdown.

    But as far as the government is concerned, there was little rationale behind indulging in another round of fiscal stimulus, even as global rating agency S&P lowered its outlook on India. Fiscal deficit as a percentage of GDP, a measure of how much more the government spends over what it earns, is already expected to touch 6%. And with the latest tax cuts thrown in, it may rise further to 6.5%. This is without considering the off-balance sheet liabilities like oil and fertilizer bonds.

    The Indian rupee reached its all time low level against the greenback. It has tumbled to 51.32 against the US dollar. Growing concerns about the continued loose fiscal policy, S&P's downgrading of the nation's credit rating and poor economic growth are the chief reasons for this slump. Furthermore, dollar demand from importers weighed heavy on the rupee.

    On India's infrastructure front, it was not surprisingly reported that, most of the projects have missed targets set by the government for the period April to December 2008. These include projects in power, coal mining, petroleum and natural gas, roads and railways. As reported in a leading business daily, the National Highway Authority of India (NHAI) missed the target of widening and strengthening 2,261 km of roads by 30%. Natural gas output was short of the goal of 30,019 m cubic metres by 5,017. Similarly, fertilizer production was 10% below the target.

    India's GDP growth slowed down to 5.3% YoY during the quarter ended December 2008. This was below the 6.1% growth projected by 21 economists on Bloomberg and is the slowest pace of growth since the last quarter of 2003. Given that growth has slowed despite the stimulus packages announced by the government leaves the task now to the RBI, which is expected to bring down interest rates further to prop up demand, thereby stimulating the economy. To add to the woes, the job situation in international markets further worsened. As per a leading business daily, about 20,000 Indians have returned home after losing their jobs overseas due to the global economic crisis.

    While India cannot escape a rap on the knuckles with fiscal stimuli of the order of a few percentage of GDP, China unleashed spending of more than 25% of its GDP. However unlike India, China runs a huge fiscal as well as current account surplus, giving it enough room to loosen its purse strings. And it is doing just that. As per a Bloomberg report, the dragon nation has drawn up a plan to strengthen its domestic auto industry and turn few of its home grown brands into world beaters.

    Source: Yahoo Finance Source: Yahoo Finance

    Source: SEBI Source: BSE

    Source: BSE Source: BSE

    Movers and shakers during the week
    Company 20-Feb-09 27-Feb-09 Change 52-wk High/Low Change from 52-wk High
    Top gainers during the week (BSE-A Group)
    Piramal Healthcare 173 208 19.9% 379 / 164 -45.1%
    Bharat Forge 79 95 19.2% 310 / 69 -69.5%
    Century Ind 151 179 19.1% 890 / 113 -79.9%
    United Breweries 80 90 12.8% 260 / 68 -65.4%
    Mphasis Ltd 150 168 12.3% 254 / 119 -33.7%
    Top losers during the week (BSE-A Group)
    Ranbaxy 207 162 -21.7% 613 / 160 -73.6%
    Sintex Industries 108 89 -17.9% 491 /87 -82.0%
    Allahabad Bank 46 40 -13.3% 109 / 39 -63.2%
    Indian Bank 100 87 -13.1% 210 / 78 -58.7%
    Pantaloon 145 126 -13.0% 550 /125 -77.1%
    Source: Equitymaster

    But Asian economies on the whole, like their western counterparts, continue to perform badly. As reported in the International Herald Tribune (IHT), Japan's economy shrank an annualized 12.7% during the last quarter of 2008. Further, Japanese exports slumped 46% from a year earlier and imports fell 32%, mirroring the trend witnessed recently in other Asian countries such as China and Taiwan. As a result of waning exports, Japan's trade deficit has ballooned to a record US$ 9.8 bn. With demand declining across the globe, Japanese manufacturers have been hit hard as a result of which production has been slashed at a rapid pace. This has been more than evident in industrial output, which has slipped 10% in January. In an economy whose growth largely depends on exports, clearly things are not likely to improve unless some semblance of a recovery begins to manifest in the global economy.

    After the recent buoyancy in prices, gold fell by about 6% during the week. This as the dollar strengthened to the highest level since April 2006 and thus taking away from the attractiveness of gold. Crude oil on the other hand saw a weekly gain of about 11% to finally close at US$ 44.8 per barrel yesterday



    Equitymaster requests your view! Post a comment on "Positives overweigh the negatives". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    5 Attributes Of Lord Ganesha You Can Apply To Your Personal Finance (Outside View)

    Aug 24, 2017

    With Lord Ganesha's attributes and teachings, awaken your inner-self and inculcate these financial habits for a sound future.

    Why Shopping Online This Festive Season Makes Better Sense (Outside View)

    Aug 24, 2017

    Online shopping if done sensibly can help you save money and carries many other advantages.

    Mr Trump Has Been Broken (Vivek Kaul's Diary)

    Aug 24, 2017

    Kelly, Mattis, McMaster, Cohn, and Mnuchin are in charge. But these Pentagon bureaucrats and Wall Street hustlers may be worse than a loose-cannon president.

    Were You Lured By Mr Market's Bait? (The 5 Minute Wrapup)

    Aug 23, 2017

    Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 24, 2017 02:32 PM