X

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.
Markets: Fed push and pull! - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 12, 2006

    Markets: Fed push and pull!

    Indian equities could not have got it better! On a week-on-week basis, the benchmark indices (BSE-Sensex and NSE-Nifty), gained by 3% each. While a large part of the gains were fueled by the US Fed's decision to pause interest rate hikes, considering weak economic data and stable inflation, another factor that seemingly worked in the favour of the Indian markets was the strong performance raked in by India Inc during the June quarter of this fiscal.

    The markets opened the week on a sullen note due to apprehensions about the Fed's imminent decision with respect to rate hikes. After seventeen successive 25 basis points interest rate hikes in the past 26 months (since June 2004), the US Federal Reserve finally paused its campaign. However, in the same breath, it also indicated that further rate hikes might be on the anvil, if 'need' be!

    Following the announcement, and in line with most of its global counterparts (except the US market, which closed weak on the back of future rate hike worries!), Indian indices closed on a buoyant note on Wednesday, with the BSE Sensex gaining by over 1% to close at its highest level since May 18, 2006. Most Asian markets were also positive on Wednesday, with the Japanese Nikkei ending higher by 2.2%.

    Following this, however, on Thursday, a bit of volatility was witnessed, as Asian shares fell after the Bank of Korea raised interest rates by a quarter of a percentage point to a five-year high of 4.5%. Beside this, the news of a terrorist plot to blow up several aircrafts in flight between the UK and the US also raised fears. The fear of this terrorist strike also led to a sharp decline (US$ 2 per barrel) in crude oil prices. However, taking all this in its stride, like they have done in the past, the markets rose again on Friday, finally closing the week with gains of around 3%.

    Net investments - FIIs Vs MFs
    (Rs m) FIIs MFs Total
    4-Aug-06 (470) 776 306
    7-Aug-06 1,159 994 2,153
    8-Aug-06 2,985 (1,265) 1,720
    9-Aug-06 2,504 1,981 4,485
    10-Aug-06 1,519 225 1,744
    Total 7,697 2,711 10,408

    As far as the institutional activity on the bourses was concerned, as compared to last week, Foreign Institutional Investors (FIIs) were net buyers this week to the tune of Rs 7.7 bn. Domestic mutual funds (MFs) also turned out to be net buyers (Rs 2.7 bn). The total net FII inflow for this calendar year has now touched the US$ 3.2 bn mark.

    Having looked the institutional activity in the last week, let us now consider some sector/stock specific developments.

    • Banking stocks closed strong this week. Major gainers included Indusind Bank (16%), Bank of Rajasthan (15%) and Yes Bank (12%). UTI Bank closed with 4% week-on-week gains. This was seemingly on the back of reports that the private sector bank has become the first Indian banking entity to raise US$ 150 m (about Rs 6.9 bn) in hybrid capital from the international market to shore up its capital base to make provisions as per Basel-II requirements. The bank mobilised US$ 150 m through 15-year subordinated Upper Tier-II bonds. The bonds carry a fixed rate of interest of 7.25% (around 2.3% higher than the 10-year US treasury). It can be recalled that the RBI had recently allowed Indian banks to raise hybrid capital (Tier-I and Tier-II) in foreign currency to meet the Basel-II norms, which mandate banks to make provisioning for market and operational risks from March 2007, besides supporting expansion of the balance sheet. The hybrid capital, thus, raised overseas by UTI Bank, not only improves its CAR position but also hedges its net interest margins, as the funds are at a relatively lower cost than domestic funds. Other Banking Stocks.

      Top gainers during the week (BSE-A)
      Company Price on
      Aug 04 (Rs)
      Price on
      Aug 11 (Rs)
      %
      Change
      52-Week
      H/L (Rs)
      BSE-SENSEX 10,867 11,192 3.0% 12671 / 7538
      S&P CNX NIFTY 3,177 3,274 3.1% 3287 / 3237
      ROLTA INDIA 168 210 25.3% 285 / 120
      RAMCO SYSTEMS 168 204 21.3% 547 / 142
      TITAN INDUSTRIES 623 752 20.7% 895 / 391
      CMC LIMITED 419 504 20.3% 645 / 335
      THOMAS COOK INDIA 485 577 18.9% 829 / 411

    • Domestic pharma major Ranbaxy received tentative approval from the US FDA to manufacture and market 'Risperidone' (brand name: 'Risperdal') Oral Solution, 1 mg/ml in the US generics market. This drug is indicated for the treatment of schizophrenia and the total annual market sales were pegged at US$66 m (IMS - MAT: March 2006). Ranbaxy will launch the drug in the US market on receiving the final approval. This news came as a positive for the company, as increased product launches will enable it to tide over the competitive pricing environment witnessed in the US generics market. The stock, however, closed the week with marginal losses. Other Pharma stocks

      Top losers during the week (BSE-A)
      Company Price on
      Aug 04 (Rs)
      Price on
      Aug 11 (Rs)
      %
      Change
      52-Week
      H/L (Rs)
      KOCHI REF 125 122 -2.8% 126 / 121
      BPCL 309 305 -1.0% 312 / 304
      RANBAXY 397 394 -0.7% 405 / 393
      STERL BIOTECH 110 109 -0.5% 110 / 108
      GTL LIMITED 139 139 -0.3% 142 / 138

    • Hero Honda has chalked out plans to set up a plant in the Haridwar industrial unit. The plant will be used for the manufacture of two-wheelers and will involve an investment of Rs 20 bn. It must be noted that Hero Honda is the largest manufacturer of motorcycles in the world and is solely engaged in the manufacture and sale of motorcycles. The company has a commanding 48% market share in the motorcycle segment. India is home to one of the youngest population in the world and is also the one with one of the lowest two-wheeler penetration levels. This has given a boost to the domestic two-wheeler industry in the past few years where double-digit growth rates in motorcycles have become the norm rather than the exception. This favourable trend has also boosted Hero Honda's performance. The stock was up 1% week-on-week. Other Auto stocks.

    Now that the June quarter results season have come to an end, stock markets have started focusing on global factors, which include the developments in West Asia and its impact on crude prices. This week also saw the Fed leaving the investor community in another wait for the next Fed meeting (due on September 20) to know the US central bank's stance on interest rates. As far as the Indian economy is concerned, we continue to believe that interest rates in India will go up further over the course of this fiscal. In this backdrop, we suggest investors to practice caution while selecting sectors/stocks for the long-term.

     

     

    Equitymaster requests your view! Post a comment on "Markets: Fed push and pull!". 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.

    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?

    Deep State First (Vivek Kaul's Diary)

    Aug 23, 2017

    Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.

    Why Hasn't Warren Buffett Rung the Bell Yet? (The 5 Minute Wrapup)

    Aug 22, 2017

    It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.

    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.

    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.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    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?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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!

    More
    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

    S&P BSE SENSEX


    Aug 23, 2017 03:36 PM

    MARKET STATS