Apr 28, 2001|
Results hold centre-stage
After surging sharply the week before, breaking the nine consecutive weeks of decline, the markets once again retreated this week. The damage was largely done on Friday, as the SEBI announced its proposal to ban forward transactions on the bourses and usher in options and futures.
The Government revised the import duty on new passenger cars and two wheelers in the current budget. Consequently, two wheeler stocks were in the limelight, as the amended finance bill was given the go ahead by the parliament. Import duty on passenger car and two-wheeler completely built units (CBUs) has been increased from 35% to 60% while duty on completely knocked down units (CKUs) has been maintained at 35%. The hike in duty will quell some of the fears of cheaper imports from our more competitive neighbour, China. Hero Honda has been a big beneficiary of this amendment, as competing in a similar price band the company's products command comparatively stronger brand equity.
Hindustan Lever Ltd. (HLL), the bellweather FMCG Company, failed to excite the markets, as it reported a flat (1.1%) topline growth for the first quarter FY02 after a stunning performance of 6% growth in 4QFY01. The subdued topline growth may not augur well for the peer group and the industry. The company contributes more than 50% of the organized FMCG market sales and consequently, could be considered a proxy for the sector's fortunes. The lower growth could also indicate weakening consumer demand. To gauge consumer demand going forward the markets may shift their attention to the meteorological department's expectations regarding the monsoon. The department is expected to come out with the number towards the end of May. A favourable monsoon season could harbinger improved consumer disposable income for the current fiscal.
May is the month of announcements. The Federal Open Market Committee (FOMC) of the Federal Reserve, the U.S Central Bank, meets again on May 15 to review the interest rate regime. The markets are expecting another round of 50 basis points cut resulting in an aggregate rate cut of 2.5 percentage points for the current fiscal. This is likely to be reflected by the markets as the meeting date approaches. In other positive news for the world's largest economy the latest GDP numbers have been stronger than expected. The first quarter GDP figure grew by 2%, which was above consensus estimates of 1% and up from 0.9% in the fourth quarter of the previous fiscal. However, there still remains some skepticism about a revival, as jobless claims are at highest levels in the past five years. Also, continuing corporate lay-offs may weaken the job market further. Possibly reflecting this weakening are the lower consumer confidence index numbers. Fresh job market data will be released next week, which could provide some clarity on the direction of the economy.
The results season could continue to hold centre stage back home. The budget session of the parliament has been adjourned amongst much fracas; consequently, there might be absence of macro drivers in the form of policy enactments. The recent SEBI proposal may further add to the weakness in the markets. Also, a joint parliamentary committee (JPC) has been formed to look into the stock market scam. Revelations from this probe could lead to markets once again stumbling in its track.
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