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A mixed week for the world

Jun 13, 2009

The Indian markets ended the week ending June 12 2009 on a positive note. Even though gains were marginal, they still managed to hold on to their positive run (fourteenth consecutive week). The country's benchmark index, the BSE-Sensex ended higher by 1% over the previous week. Other Asian markets put up a decent performance as well. While Japan (up 4%), China (up 2%) and Hong Kong (up 1%) recorded weekly gains, Singapore posted a decline of 1%. As for other global markets, US, Brazil (up 0.4% each) and UK (up 0.1%) ended on a positive note, while Germany and France ended marginally lower.Coming to the performance of sectoral indices in India, stocks forming part of the metal, IT and energy sectors led the pack of gainers. The BSE-Metal and BSE-IT indices recorded gains of about 5% and 3% respectively over the previous week. On the other hand, the pack of losers was led by realty and banking stocks. The BSE-Realty and BSE-Bankex indices recorded losses of about 9% and 2% respectively. The BSE-Smallcap Index ran out of steam this week as it declined by 7%, while the BSE-Midcap Index fell by nearly 3%.

Data stating the institutional activity shows that both, FIIs (foreign institutional investors) and domestic mutual funds continued to pump money into the markets during the week gone by. While the FIIs invested over Rs 44 bn, the domestic mutual funds invested about Rs 7 bn during the week barring Friday (data for Friday was not available at the time of writing).

Coming to news of India Inc., during the week, a leading business daily reported that HDFC plans to raise up to Rs 40 bn through qualified institutional placement (QIP) of secured redeemable non convertible debentures (NCDs) and warrants in order to grow its loan book. It has received an in principle approval from the board regarding the same. Interestingly, the NCDs are likely to come with detachable warrants and will likely dilute up to 3.5% equity share capital if all warrants were fully exchanged for equity. These debt instruments have tenure of 3 years with rates of around 7.25%-7.5%. With these additional funds coming in, the company expects to grow its loan book at a faster rate at the time when the demand for housing loans is reviving. It may be noted that HDFC had disbursed loans worth Rs 300 bn in FY09.

Further, the COAI (Cellular Operators Association of India) announced that the telecom operators added nearly 8.3 m GSM subscribers during the month of May 2009. This would be its second sequential decline on a month on month basis. While the short term trend shows that the sector is facing a slowdown considering that the industry recorded its highest ever GSM addition during the month of March 2009 (almost 11 m). However, going by the relatively longer trend though, it does seem a tad too early to call it a 'slowdown'.

Moving on, a leading business daily reported that engineering major, BHEL bagged a Rs 40 bn order from Hindalco Industries for supplying boilers, turbines and generators at its 900 MW captive power plant in Orissa. It may be noted that Hindalco recently placed a similar order with the company for the main plant package of its 900 mw captive power unit in Madhya Pradesh. This is a positive development for BHEL considering the magnitude of the order. At the end of FY09, the company had an order book of Rs 1,174 bn which is nearly 4.5 times its FY09 revenues.

Source: Yahoo FinanceSource: Yahoo Finance

Source: BSESource: BSE

Movers and shakers during the week
Company 5-Jun-09 12-Jun-09 Change 52-wk High/Low Change from 52-wk High
Top gainers during the week (BSE-A Group)
Sesa Goa 157 203 29.1% 199 / 60 2.0%
JSW Steel 585 707 20.8% 1,074 / 161 -34.2%
Tech Mahindra 637 723 13.5% 814 / 204 -11.2%
HCL Tech. 175 195 11.6% 295 / 89 -33.8%
Jindal Steel 2,275 2,516 10.6% 2,425 / 517 3.8%
Top losers during the week (BSE-A Group)
REI Agro 98 73 -25.8% 168 / 36 -56.7%
Jai Corp 350 271 -22.6% 458 / 59 -40.9%
Aban Offshore 1,241 1,008 -18.8% 3,814 / 224 -73.6%
Jet Airways 352 288 -18.2% 567 / 115 -49.2%
India Infoline 163 137 -16.2% 166 / 34 -17.5%
Source: Equitymaster

Inflation (as measured by WPI) for the week ending May 30 stood at 0.13%. This is the lowest figure recorded in around three decades. Last week, the figure stood at 0.48%. The main reason behind this fall was the decrease in prices of manufactured products. However, prices of food items increased on a week on week basis. It may be noted that inflation during the same week last year stood at 9.32%.

The IIP (Index of Industrial Production) numbers for April 2009 were announced during the week. Industrial production grew by 1.4% in April 2009 as compared to a 6.2% growth in April 2008, while the same had declined by 2.3% in March 2009. Manufacturing and mining output grew by around 0.7% YoY and 3.8% YoY during the period under consideration. Electric generation registered a growth of 7.1% YoY, while capital goods output declined by 1.3% YoY in April 2009.

During the week, Dr. Manmohan Singh, India's prime minister stated that India is capable of growing by 8%-9%, even after the recent global financial meltdown. And the reason it can do so is because of its high savings rate. "Since our savings rate is as high as 35%... if all work together, we can achieve a growth rate of 8%-9%, even if the world economy does not improve", is how the man, who many consider as the architect of India's modern reforms, chose to put it across. He further added that the country is expected to log in a growth rate of 7% this fiscal, a number which is good enough given the turmoil the rest of the world, especially the developed world is into.

In global news, the International Energy Agency (IEA) marginally raised its global crude oil forecast on signs that the economic slowdown is lessening. It may be noted that this is the first time it has done so in ten months. However, it has also stated that this revision does not necessarily mean that the global economy is recovering, and that it may signal the bottoming out of the recession. The agency has revised its estimates for the year, predicting consumption to increase by 120,000 barrels a day over the previous forecast, taking the total to 83.3 m barrels a day. Further, it believes that countries such as the US and China will drive demand. However, it also added that consumption worldwide will contract by 2.9% from last year.

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