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.
A zigzag week comes to an end - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 14, 2009

    A zigzag week comes to an end

    The Indian markets continued their volatile trend as alternate bouts of gains and losses were seen throughout the week. However, on a net level, India's benchmark index the BSE-Sensex ended the week higher by about 2%. Similar to last week, the market movement was driven by various factors - the drought situation, global markets and FII activity amongst others. As for global markets, gains were largely seen in stocks from the Asian region. However, the Chinese markets were the top losers, ending the week lower by about 7% as compared to the previous week. The pack of gainers was led by Singapore (up 3%), Hong Kong (up 3%) and Japan (up 2%). As the US and European markets were still trading at the time of writing, we have taken their respective closing prices as of 13th August 2009. On that basis, Brazil (up 1%), UK (up 1%) and US (up 0.3%) ended the week on a positive note.

    Source: Yahoo Finance; ^ As of 13th August 2009

    Coming to the performance of sectoral indices during the week, barring stocks from the FMCG space, buying activity was witnessed across the board. Stocks from the realty space emerged as the top gainers this week. The BSE-Realty Index ended higher by about 8% over the previous week. Stocks from the metal and oil & gas space followed suit as the BSE-Metal and BSE-Oil& Gas indices ended higher by 5% and 3% respectively. Stocks from the smallcap and midcap spaces saw some action during the week as well. The BSE-Smallcap and BSE-Midcap indices ended higher by about 4% and 3% respectively. Amongst the lowest gainers were stocks from the PSU, IT and capital good sectors. While the BSE-PSU index ended higher by 1%, the BSE-IT and BSE-Capital Goods indices ended higher by about 2%.

    Source: BSE

    Coming to corporate news, during the week the Society of Indian Automobile Manufacturers (SIAM) reported that automobile companies recorded a 21% YoY growth in automobile sales during the month of July. A total of 941,118 vehicles were sold during the month. This growth was largely driven by sales of cars and utility vehicles, which increased by 29% YoY while sales of two-wheelers increased by 20% YoY. On the other hand, sales of medium and heavy commercial vehicles dipped by 8% YoY. This was, however, much lower as compared to a year on year drop of around 35% since April. Few key reasons for the strong growth in passenger car segment were new product launches, drop in vehicle loan costs and a low base effect of last year. According to SIAM, all the segments would witness a smooth ride during the year. The key growth drivers will include low interest rates and new launches.

    Moving on from news of the auto sector, during the week, a leading business daily reported that major biscuit manufacturers are considering price hikes and cost-cutting measures in light of the weak monsoon season. Also, the fact that high sugar prices are impacting companies cannot be ignored. The price of sugar, which is a key input for these companies, has risen by over 40% since January 2009. Sugar prices are expected to further increase on account of lower monsoons coupled with an already lower sugar production. It may be noted that sugar accounts for nearly 12% to 20% of the overall input costs of biscuit companies. According to the management of biscuit major ITC, the focus would be on greater control and cost-cutting measures, as the company would not be able to pass on the full increase in sugar prices to consumers. The price increases are likely to be in the range of 3% and 6% in the long term. In addition to high sugar prices, the price of wheat is expected to rise due to lower monsoons.

    During the week, realty major, DLF bagged the metro rail project from the Haryana government for its townships in Gurgaon in consortium with IL&FS. The metro link will be called 'DLF MetroRail, Gurgaon' and is estimated to require an investment of around Rs 9 bn. DLF will hold around 26% stake in the consortium, while the balance will be held by IL&FS. The consortium has been awarded the project for a concession period of 99 years on a build and operate model. It is believed that the 'DLF MetroRail, Gurgaon' will be connected to the Delhi metro. The projected is expected to be completed in next 30 months. DLF plans to float a special purpose vehicle (SPV) for the project, which will raise around Rs 7 bn in the next 6 months. This is a rather surprising move by the company considering that it was looking to focus on housing and commercial projects and exit from non-core businesses such as wind power amongst others.

    As per the provisional data issued by Ministry of Commerce and Industry, inflation as measured by the wholesale price index (WPI) has fallen sharply to a negative 1.74% for the week ended August 1. The RBI has clarified that the fall in inflation is on account of high statistical base same period last year (inflation of 12.91% P.Y) and not on account of demand contraction. The price of food article, in fact, has risen by 10.2% compared to same period last year and 0.2% compared to a week earlier, prompting government to take some measures towards supply shortages in farm products.

    Moving on to economic news, during the week the Centre for Monitoring the Indian Economy (CMIE) revised its FY10 GDP growth forecast downward to 5.8% from its earlier estimate of 6.6%. The key reason for the downward forecast is the poor monsoons. As such, the agency expects crop production to fall by about 5% and the overall agriculture to decline by 2% YoY during the fiscal. It may be noted that the CMIE had earlier estimated the agriculture industry to grow by about 2%. As far as individual crops are concerned, it expects a 9.5% fall in rice production and also sugarcane to be significantly affected as the major sugarcane growing regions of Uttar Pradesh have witnessed a significant drop in monsoon showers. It may be noted that agriculture accounts for nearly 18% of India's GDP.

    The IIP (Index of Industrial Production) numbers were announced earlier this week as well. As reported, India's industrial production grew by 7.8% YoY during the month of June 2009 as against a 2.2% growth recorded during the month of May. This sharp rise in June was on account of higher demand for consumer goods and increased mining activity. Output of consumer durables such as home appliances, for instance, rose by 15.5% YoY during the month.

    Goldman Sachs, one of the leading financial institutions in the world, is of the view that economic gains from industrial activity (i.e., rise in industrial production) will mitigate the negative impact of poor rains. Believing that financial conditions have eased, the institution is of the belief that the same will help in lessening the impact of the agricultural sector, which has been impacted due to poor monsoons. However, we believe that the erratic monsoons could impact demand over the next few months. This is also by taking into consideration that rural demand, which accounts for more than half of India's domestic consumption, has been largely impacted in the past when monsoons have been weak. And the impact is felt on industrial production as well.



    Equitymaster requests your view! Post a comment on "A zigzag week comes to an end". 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.

    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.

    A Darkness Is Spreading Across the US (Vivek Kaul's Diary)

    Aug 22, 2017

    Today, we are attacked by one preposterous thing after another, each of them even more absurd than the last.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    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.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    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!

    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


    Aug 22, 2017 (Close)