While the week saw only three trading sessions, it was an eventful one for the Indian markets as the country's benchmark index, the BSE-Sensex crossed the 17,000 mark after a span of nearly sixteen months. The Indian markets were in fact, the top gainers amongst the key world indices during the week. The BSE-Sensex ended higher by about 2.6% over the previous week. Brazil was the other market which recorded a gain on a weekly basis. The pack of losers this week was led by Japan and Hong Kong, which ended lower by about 5% and 3% respectively. They were followed by France, Singapore and China, which were down by about 2% each. The US and UK markets ended the week lower by about 2% as well. Losses in Asia were mainly due to concerns of economic recovery.
|Source: Yahoo Finance
Coming to the performance of sectoral indices in India, the week saw no losers as all the indices ended on a positive note. The pack was led by stocks forming part of the BSE-Bankex and BSE-IT indices as they ended higher by about 5% each. Stocks from the BSE Small cap (up 2%) and BSE Midcap (up 1%) indices ended the week on a positive note as well. However, investors preferred the heavyweights this week as gains in the BSE-Sensex were relatively higher. Stocks from the consumer durables, FMCG and realty sectors were amongst the lowest gainers during the week. While the BSE-Consumer Durables Index ended marginally higher, the BSE-FMCG and BSE-Realty indices ended higher by about 1% each.
Moving on to corporate news, auto manufacturers announced their sales volumes for the month September during the week. Maruti Suzuki, India's largest car manufacturer sold nearly sold over 83,300 vehicles during the month. While the overall numbers look good, it should be noted that the company has underperformed when compared to its performance during the earlier months. Part of the reason could be the competitive environment that is getting intense by the day.
M&M also reported its sales numbers for the month of September recently. The company reported an 11% YoY growth in volumes. An increase in volumes was largely contributed by the growth in its SUV segments, which increased volumes by 37% on a year on year basis. Further, Bajaj Auto reported a 14% YoY growth in sales of two-wheelers and a 16% YoY increase in sales of three-wheelers. About 29% of the unit sales were of its newly launched vehicle, the Bajaj Discover DTS-Si. On the other hand, 22% of the volumes were contributed by its Pulsar brand.
Moving on to news from the telecom sector, Bharti Airtel was in the limelight this week as the deadline of its exclusive period with MTN came to an end on September 20, 2009. The company announced that it along with MTN mutually agreed to disengage from its merger discussions. As per the company, this conclusion was made on account of the inability of the South African government to approve the deal in its current form. However, it also added that it hopeful of the government reviewing its position in the future. In fact, there has been news floating around that the two companies might seek to resolve the regulatory hurdles. The day after this announcement was made; Bharti Airtel's stock was the top gainer on the BSE-Sensex. While this may have been a major setback for Bharti Airtel in terms of its long term strategy, investors seemed to have cheered this development.
However, a leading business today has reported that the company is looking to take on MTN to bid for Zain Telecom, which is a Kuwaiti based telecom service provider. A month ago, a business daily had reported that MTN was looking to acquire Zain's African assets. It may be noted that Bharti officials have not confirmed this news.
During the week, engineering major L&T reportedly expressed its intentions of aggressively scaling up its nuclear power equipment business. In fact, the company wants to grow its order books significantly and take it up to levels of Rs 70 to Rs 80 bn (in this segment) over the next eighteen months. Currently, this segments has a order backlog of about Rs 10 bn. The company expects advanced nuclear power equipment orders to flow from the end of CY10 or early 2011. This would provide the company with a great opportunity to scale up its revenues from nuclear power business.
The recent events show that the Indian IT Industry has turned the corner after battling the fierce global economic slowdown. The poor IT spending by firms across the globe resulted in poor revenue visibility forcing IT majors to constrain their hiring plans. However, it seems that scenario is changing for the better now. Like its other peers, HCL Technologies is now looking to ramp up its hiring plans. The company which has won some significant deals in the US and European markets in last couple of months will be hiring around 2,000 people domestically to cater to these requirements. Most of this hiring will happen at lateral and senior delivery staff levels, along recruitment at fresher level.
Movers and shakers during the week
Data Source: CMIE Prowess
|Top gainers during the week (BSE-A Group)
||928 / 369
||4,992 / 1,331
||1,600 / 545
||1,017 / 279
||928 / 253
|Top losers during the week (BSE-A Group)
||104 / 36
||2,938 / 831
||173 / 34
||95 / 47
||660 / 227
Inflation measured by the wholesale price index stood at 0.83% for the week ending September 19. During the preceding week, the same figure stood at 0.37%. A major reason for this sharp increase was higher food prices. It is reported that inflation in food articles for the week under consideration was at an eleven-year high of 16.3%. A key reason for the same is the poor monsoons, which have led to 40% of India's district being declared as drought-hit. However, experts are of the belief that prices of food items are likely to drop as the kharif produce (summer crops) will be available in the markets in the coming weeks.
Coming to industry news, there have been reports that order books of Indian companies have hit an all time high of Rs 733 bn in 2QFY10. This is nearly double of what it was in 1QFY10. On a year on year basis, the figure is higher by a robust 21%. The capital goods and infrastructure sectors are by far the leaders of this pack. Engineering major, L&T is topping the list as it has roped in new orders worth Rs 142 bn. the situations is also similar for smaller players as order inflow has picked up significantly post the general elections earlier this year. It may be noted that with the bulging order books, the revenue visibility of these companies is high. However, one should not ignore the execution risks. In these times of exuberance, one would do well to not get so optimistic about the sector that one became the victim of paying overly optimistic prices.
In international news, the unemployment rate in the US hit another 26-year high in September, as the long-battered US labour market took an unexpected turn for the worse. The US Labour Department's latest report said that there was a net loss of 2.6 lac jobs in September, up from a revised loss of 2 lac jobs in August. It is also important to note that this is only the second time in 2009 that job losses rose month on month, after the US labour market started showing a steady recovery since the loss of 741,000 jobs in January this year. Having said that, the fact that despite all the stimuli that the US government has been pumping into the economy, an unemployment rate of 9.8% in September (9.7% in August) is unlikely to facilitate consumption. Hence the scope of US' economic recovery and recovery of all the economies and industries that are linked to US' consumption stands limited.