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A mixed week for markets worldwide

Nov 21, 2009

Continuing with the positive run over the past two weeks, the Indian markets ended on a firm note during the week ending 20th November, 2009. Closing just above the 17,000 points mark on Friday, India's benchmark index, the BSE-Sensex recorded a week on week gain of about 1%. In fact, this weekly gain was possible due to the strong buying activity witnessed during the second half of Friday's trading. This sudden strong buying activity was supposedly on the back of the deputy chief of India's Planning Commission, Mr. Montek Singh Ahluwalia indicating that the government has no intentions of imposing a tax to curb the inflow of foreign funds. Moving on to global markets, China, Brazil and Singapore were the top performers this week. While China ended higher by about 4%, Brazil and Singapore ended higher by about 2% and 1% respectively. Amongst the top losers were Japan and France, which ended lower by about 3% and 2% respectively. UK and Hong Kong, on the other hand, ended lower by about 0.5% each. The US markets ended the week on a positive note, with the Dow ending higher by about 0.5%.

Source: Yahoo Finance

Coming to the performance of BSE indices, metal stocks continued to steal the show as they were the top gainers this week as well. The BSE-Metal Index ended higher by about 4% this week. Stocks from the auto and IT space followed suit, with the BSE-Auto and BSE-IT indices ending higher by about2% each. Stocks from the realty and power sectors were amongst the top underperformers this week. While the BSE-Realty Index ended lower by about 0.5%, the BSE-Power Index ended the week on a flat note. Stocks from the engineering space ended the week on a flat note as well.

Moving on to institutional activity during the week, the foreign institutional investors (FIIs) seemed to be on a shopping spree as they invested nearly Rs 21 bn (net figure) during the week. The domestic mutual funds, in contrast, seemed to go in for profit booking this week as they sold investments worth Rs 8 bn (net figure; barring Friday as data was not available at the time of writing). It must be noted that foreign investors have so far bought more than US$ 15 bn of Indian equities in 2009, after selling US$ 13 bn worth of the same in 2008.

Source: BSE

Let us take a look at the key corporate developments that took place this week. Telecom major, Bharti Airtel was in the news this week on the back of it launching a new plan that would reduce mobile roaming charges by about 60%. This however, did not seem to go well with the investors as a lot of uncertainty is looming over the ongoing price wars between the Indian telecom companies. It is likely that the company may have gone in for such a move on the back of it trying to compete with the newer players who initiated the local call tariff wars. In addition, Bharti has also been lagging smaller rivals in monthly subscriber additions. It is possible that this move is aimed at ramping up its monthly subscriber additions. These lower charges will also impact the company's profitability to a certain extent.

In other telecom news, the Telecom Regulator of India or TRAI has cleared mobile number portability, a process which allows mobile phone users to retain their numbers while switching service providers. The charges for the same, which are to be borne by the customers, will be a fee of only Rs 19. While subscribers in Delhi, Mumbai, Kolkata and category 'A' circles (such as Maharashtra, Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh) will be allowed number portability from the new year, the rest of the country will have the facility from March 2010.

Shipping stocks were in demand this week on the back of the surge in freight rates in recent times. With the Baltic Dry Index gaining by about 110% over the past two months, the prospects of shipping majors are expected to improve in the coming future. This surge in freight rates is mainly on the back of an increase in import of iron ore and food grains by China. It must be noted that at current levels, the Baltic Dry Index is at its 14-month high. Amongst stocks forming part of the BSE- 'A' Group, shipping major, G.E. Shipping was amongst the top five gainers this week.

The stock of wind turbine maker, Suzlon energy ended the week higher by about 9%. This was on the back of the company successfully selling a 35.2% stake in its subsidiary Hansen Transmissions. This has allowed Suzlon to raise about Rs 17 bn via this stake sale. Post this sale, Suzlon's stake in Hansen will stand at 26%. As per the management, it will continue its existing relationship with Hansen which is a strategic supplier for the company. Significantly, all other things including the supply pact and Suzlon's representation on the board of Hansen will remain unchanged. The funds raised via this stake sale will go towards easing the liquidity position of the company and reducing the debt on the company's books which stood at Rs 165 bn on a consolidated basis.

Recording a weekly gain of 14%, pharmaceutical major Glenmark Pharma was the top gainer amongst stocks forming part of the BSE 'A' Group. This was on the back of the company signing two major agreements with US based Medicis Pharmaceutical Corporation. As part of these agreements, Glenmark will co-develop a dermatological product with Medicis, for which it will receive US$ 5 m as one-time payment. Further, Glenmark Generics (the company's generics subsidiary) has also agreed to settle all pending patent issues with Medicis for two of its products. As per reports, Medicis will conduct phase-III clinical trials (spread over 3 years) of Glenmark's patented new drug delivery system for the treatment of acne. Glenmark will be receiving milestone payments at the end of each stage of drug development. And if the product is commercialised in US, it will also get royalty for the same. This is a positive for Glenmark given that it has witnessed some setbacks in its R&D programme in the past one year.

Movers and shakers during the week
Company13-Nov-0920-Nov-09Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Glenmark Pharma222 254 14.4%337 / 119
Power Finance Corp.226 251 11.3%255 / 97
G.E.Shipping260 289 11.2%311 / 142
Aban Offshore1,235 1,372 11.1%1,645 / 224
Pantaloon302 335 11.0%348 / 105
Top losers during the week (BSE-A Group)
Exide Industries119 108 -8.6%122 / 35
Hindustan Copper292 269 -8.1%328 / 70
Balrampur Chini145 134 -7.5%160 / 30
Mphasis773 715 -7.5%777 / 139
United Phosphorus145 135 -6.9%186 / 73
Source: Equitymaster

Coming to economic news, during the week the Centre for Monitoring Indian Economy (CMIE) revised upwards, its FY10 GDP growth guidance for the Indian economy to 6.2%, from 6% earlier. The upward revision in the GDP projection supposedly comes on the back of a better performance of the economy in the first half of the fiscal. Interestingly, CMIE had raised the GDP growth forecast to 6% in October from 5.8% announced in September. So this revision comes close on the heels of the last one.

Now, while the CMIE may be of the view that the situation of the economy is improving, the economists, whom the RBI surveys think otherwise. As per the survey, the GDP growth is estimated slightly lower at 6%. It may be noted that the economists surveyed by the RBI have lowered their estimates from 6.5% earlier. The main reason attributed for the same is the weak agriculture output. As for the industrial growth, growth estimates have been revised upwards from 4.8% to 6.3%, while for the services sector, there has been a slight downward revision from 8.3% to 8.1%.

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