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China, India steal the show

Jul 4, 2009

As compared to the global markets, India put up a decent performance during the last week. The benchmark BSE-Sensex increased week-on-week by almost 1%. However the Chinese markets performed even better, recording gains of about 6%. Weakness was witnessed in other global markets with Hong Kong, US, Germany and Brazil leading the pack of losers, recording losses in the range of 1% to 2%. Other markets such as UK and France recorded marginal losses during the week gone by.

Source: Yahoo Finance

Coming to the performance of sectoral indices in India, PSUs emerged as the top gainers during the week. They were followed by the stocks forming part of the consumer durables and metal indices. While the BSE-PSU Index saw a gain of 3.8%, the other two gained by 3.6% and 3.4% respectively. Stocks from the IT, auto and capital goods spaces remained out of favour this week. The BSE-IT, BSE-Auto and the BSE-CG indices recorded losses of around 1% each.

Source: BSE

Auto sales volumes for the month of June were announced during the week. Two-wheeler major, Bajaj Auto reported a 2% YoY fall in total sales as compared to the same month last year. While its total two-wheeler sales dropped by 5% YoY, three-wheeler sales increased by 26% YoY. On the other hand, its peer group company <>Hero Honda put up a much better performance. The company's volumes were up by 24% YoY during the month. Coming to four-wheeler manufacturers, Maruti Suzuki reported a 23% YoY increase in sales as against the same month last year. While domestic sales grew by 10% YoY, exports witnessed a growth of 175% YoY and formed about 18% of total unit sales. The company registered its highest ever export sales during the month (over 13,000 units). The reason for the same was the higher demand from the European markets.

FY09 results of certain other corporate heavyweights poured in last week. Tata Motors reported a loss of Rs 25 bn. This was mainly due to the poor performance of Jaguar Land Rover (JLR), which it acquired during FY09. It is believed that JLR witnessed a 32% YoY decline in volumes between June 2008 and March 2009, the period that it spent as part of Tata Motors.

Engineering major Suzlon also announced its results during the week. The company's consolidated topline grew by 91% YoY on the back of consolidation and acquisition of further stake in REpower Systems during the fiscal. However, its operating profits grew by only 31% YoY. Its operating margins contracted by 4.7% YoY to 10.1% during the fiscal. This was mainly due to higher other expenses and employee costs (as a percentage of sales). At the profitability level, the number was lower by 77% YoY. Apart from a poor operating performance, substantially higher extraordinary expenses brought down the profits.

Movers and shakers during the week
Company26-Jun-093-Jul-09Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Educomp Solutions3,535 4,440 25.6%4,590 / 1,331
Tulip Telecom736 898 22.0%1,090 / 258
BJAT Hold. & Invst.363 416 14.5%555 / 210
BEML9051,033 14.2%1,154 / 280
Jain Irrigation61770314.0%715 / 229
Top losers during the week (BSE-A Group)
Gujarat NRE Coke50 42 -15.1%100 / 17
Suzlon123 107 -13.4%252 / 34
Tata Motors340 301 -11.7%432 / 122
REI Agro75 67 -11.0%141 / 39
Mphasis409 365 -10.7%414 / 137

Inflation as measured by the wholesale price index (WPI) fell to -1.3% during the week ending June 20. During its previous week, it stood at 1.14%. It may be noted that the WPI has now fallen for three consecutive weeks. However, RBI governor Dr. D. Subbarao believes that India is not in the grip of deflation as food price inflation still remains in double digits. However, we believe that inflation figure is unlikely to remain in the negative territory for long as fuel prices have been hiked recently. This will gradually perk up food prices further.

During the week gone by, the government hiked prices of transport fuels, thereby also lowering expectations of any deregulation in the same. While the price of petrol has been hiked by Rs 4 per litre, diesel prices have been increased by Rs 2 per litre. This move comes in as no surprise considering that the global crude prices have significantly moved up over the past few months due to which public sector oil marketing companies (OMCs) - Indian Oil, BPCL and HPCL - have been unable to recover their input costs.

Speaking of crude oil prices, the commodity saw some volatility during the week gone by. It ended the week at about US$ 67 a barrel, lower by about 6.4% from last week's price. A strong reason for the same was the high unemployment data recorded across the US and Europe. This indirectly raised concerns over lower energy demand. The data released has painted a very sorry picture indeed, with the US economy losing 467,000 more jobs in June and the unemployment rate edging up to 9.5%. It may be noted that this rate is the highest the US has witnessed in 26 years. The unemployment rate in Europe also rose to 9.5%, a 10-year high.

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