Jul 25, 2009|
India lags behind Asian peers
The Indian markets ended the week on a strong note with its benchmark index, BSE-Sensex rising by about 4% and in the process touching its highest level in over a month. A key reason for this performance during the week is the announcement of June quarter results by industry heavyweights, which seem to have beaten market expectations. In addition, positive cues from global markets also added to the cheer. Key global indices ended the week higher by about 4% to 6%. Asian markets such as Hong Kong, Japan and China led the pack of gainers recording weekly gains of about 6% each. European markets, Germany and France followed suit, recording gains of about 5% each. The US, Singapore and UK markets were amongst the lowest gainers this week, recording gains of about 4% each.
|Source: Yahoo Finance
Coming to the performance of sectoral indices during the week, real estate stocks continued from where they left off last week, emerging as favourites this week as well. The BSE-Realty Index ended the week higher by around 13% (about 18% last week). Stocks from the auto and metal space were the other key gainers with the BSE-Auto and BSE-Metal indices ending higher by 9% each. On the other hand, stocks forming part of the BSE-PSU and BSE-Power indices emerged as the lowest gainers, recording gains of about 1% and 2% respectively. Midcap and smallcap stocks ended the week with decent gains, with the BSE Midcap and BSE Small cap indices ending higher by about 5% and 7% respectively.
Coming to corporate news, the past week saw a handful of large companies announce their June quarter numbers. Cement major, Ambuja Cements reported a topline growth of almost 20% YoY during the quarter. This growth in topline was led by higher volumes and realisations. While sales volumes were higher by 9% YoY, realisations increased by 10% YoY. The company's net profits, however, grew by only 7% YoY (excluding extraordinary adjustments in the corresponding quarter last year) during the quarter. This was on the back a contraction in operating margins, which led to a 10% YoY growth in operating profits.
Oil and gas majors, ONGC and Reliance Industries also announced their results during the week. ONGC's topline (standalone) declined by 26% YoY during the quarter. This was mainly on account of discontinuance of trading of MRPL products during the quarter as compared to Rs 25 bn from the same in 1QFY09. On a like to like basis, ONGC's topline declined by 15% YoY. Further, the company's profits declined by 27% YoY. This was despite receiving a lower subsidy in the quarter. The impact of subsidies on the topline stood at Rs 4 bn in 1QFY10 as compared to Rs 98 bn in 1QFY09, while the impact on the bottomline stood at Rs 2 bn as compared to Rs 55 bn in 1QFY09.
Reliance Industries reported a decline of 23% YoY in revenues during 1QFY10. This was led by a fall in its petrochemicals (down 22% YoY) and refining (down 23% YoY) businesses. Operating margins, however, expanded by 3.8% YoY (to 18.5%). This is largely on account of lower raw material costs and other expenditure (as percentage of sales). As for its bottomline performance, the company reported a 12% YoY fall in numbers during the quarter. As per the company gross refining margins stood at US$ 7.5 per barrel during the quarter, as compared to US$ 15.7 per barrel in 1QFY09.
Other major companies that announced results during the week included capital goods major, BHEL and telecom giant, Bharti Airtel. BHEL put up a strong performance during the quarter ending June, wherein it reported a topline growth of 29% YoY. This was aided by a 30% YoY growth in sales of the power division. Further, the company was able to manage an improvement in operating margins to 9.2% (from 8.6% in 1QFY09) thereby aiding a 22% YoY growth in net profits.
Bharti Airtel reported a topline growth of around 23% YoY during 1QFY10. This growth was led by the mobile service business, which grew by 19% YoY in 1QFY10. The growth in this segment was largely on the back of a strong increase (47% YoY) in the company's mobile subscriber base. The company reported a 22% YoY increase in profits, on the back of a stable operating performance. During the quarter, Bharti's average revenue per user (ARPU) declined by 20% YoY, which is a big fall by Bharti's standards. The two major reasons behind the sharp fall in ARPUs is the 33% reduction in mobile termination charges and the impact of the increasing rural customers in its subscriber base. As per the company's management, about 60% of the net addition came from the rural markets.
Movers and shakers during the week
Inflation numbers for the week ended July 11 rose marginally to -1.17% during the period as compared to the figure of -1.21% a week earlier. It may be noted that this is the sixth consecutive week wherein the inflation rate has been in the negative territory. During the corresponding week last year, the inflation figure stood at 12.13%. The marginal rise in inflation during the week ending July 11 was attributed to growth in the price of primary food articles mainly marine fish, fruits and vegetables. The rise in the price of aviation turbine fuel also contributed to the increase.
Continuing with the discussion on rising commodity prices, oil prices during the past week rose by over 7% on optimism that the turnaround in the global economy will increase the demand for fuel. Crude oil prices settled at a little over US$ 68 a barrel as against US$ 63.6 a barrel at the end of last week. Crude oil prices have risen significantly in the year till date. In fact, they have more than doubled from the lows of US$ 33 a barrel that they touched in December 2008. As per CNN, a raft of survey reports in Europe suggested the worst of the recession may have passed by mid-year and that industrial output has started to stabilise. However, the same cannot be said about the US. As per a survey conducted by Reuters/University of Michigan, consumer confidence in late July waned to a lowest reading since April on growing pessimism about the long-term economic outlook.
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