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.
World markets rise as optimism returns - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 26, 2009

    World markets rise as optimism returns

    The festive spirit really seemed to have caught up with the markets this holiday shortened week. All major indices across the world saw gains this week. India too found itself amongst the gainers. It was, infact, one of the top gainers, second only to the United Kingdom. India's benchmark index, the BSE-Sensex ended the week higher by 3.8%. This, after a dismal performance last week when the index saw a decline to the tune of 2.3%.

    As far as global markets are concerned, the general optimism that the global economic recovery is strengthening seems to have spilled over to markets across the world. The UK markets led the gains this week, with its index ending higher by about 4%. After India, next in line were Japan and France, which ended higher by about 3.5% and 3.1% respectively. Most markets were propped up by technology and commodity stocks, which rose on the perception of a better outlook for a recovery. After last week's dismal performance, the Chinese and Brazilian markets once again found themselves at the bottom of the heap, rising only 0.9% and 1.2% each.

    Source: Yahoo Finance


    Coming to the performance of BSE indices, metal stocks were in favour this week as the BSE-Metal index ended higher by an awesome 6.8%. It was followed by the BSE-Oil & Gas index which recorded gains of about 4.8% after losing 4.1% in the previous week. The BSE Power index gained 4.6% this week. This was closely followed by banking and PSU stocks which notched gains of 4.5% and 4.1% respectively. After last week's hammering, banking stocks were back in the positive this week. The BSE-Bankex closed 4.5% up. Soothing comments from the finance ministry that sort of doused the fear of higher interest rates in the near future seemingly benefited these stocks. Dr. Montek Singh Ahluwalia, the deputy head of India's Planning Commission, said during the week, "The sharp surge in Indian food prices reflects the impact of the drought and inefficient distribution, which could not be addressed by monetary policy." Pharma stocks were the only losers this week as the BSE Healthcare index saw a marginal decline of 0.1%.

    Source: BSE


    Moving on to the key corporate developments during the week, the Oil & Gas sector seemed to be in favour during the week on reports that the oil ministry has requested the Prime Minister to immediately issue oil bonds to the tune of Rs 209 bn to public sector oil marketing companies - Indian Oil, BPCL and HPCL - to compensate for their under recoveries on the sale of petroleum products. It may be noted that no oil bonds have been issued in the last three quarters even though the three firms currently lose Rs 3.5 per litre on petrol, Rs 2.4 per litre on diesel, Rs 18.1 per litre on kerosene and Rs 250.7 per LPG cylinder. In fact, they are projected to lose Rs 450 bn in revenues during FY10. This sorry state of affairs stems from the fact that fuel prices in India are kept artificially low due to socio political reasons. In our view, as long as this root cause remains, someone has to bear the brunt. The candidates by default are the oil marketing companies.

    Reports suggested that consumer goods companies are cutting quantities in their standard packs to protect their margins. Especially in the packaged foods category. Given that food prices have hit a decade's high, branded biscuits, chips and namkeens are 20% to 25% lighter while chocolates are 10% lighter at the same price. Interestingly, companies are not keen to tinker with the price points as they fear that consumers may move to regional brands. As a result companies such as Britannia, ITC, Cadbury and Nestle have increased their focus on price points of Rs 2, 3, 5 and 10 over the past six months in order to push volumes. In our view, the companies have little choice given that the unorganised sector is almost as big as the organised sector in this category and has deeper penetration in the key regional markets.

    Cement prices are firming up in many parts of the country. However, the increase seems to be more due to logistical constraints resulting from a shortage of railway wagons. Prices have especially firmed up in the western and southern regions of the country since the start of December and could move up by another Rs 5 per bag in some regions. Further, cement prices in the southern market of Andhra Pradesh have registered a slight increase of Rs 10 to Rs 15 per bag. Prices in the southern markets are currently ruling in the range of Rs 135 to Rs 180 a bag. In the western regions, including Mumbai and Gujarat, cement prices have seen an increase of Rs 8 to Rs 10 a bag since December beginning. Apart from the shortage of railway wagons, reports suggest that there has also been some increase in demand for cement due to construction work for the 2010 Commonwealth Games. Fuel costs have also risen. These factors together have prompted cement companies to raise prices.

    According to a leading business daily, experts from the IT industry are expecting the sector to grow in double digits in the next fiscal. TCS' vice-chairman, Mr Ramadorai seconds this view. He hints of a robust deals pipeline both, in the domestic as well as the international market. The condition in the US, the major market for almost all Indian IT companies, is also stabilising. TCS has begun to see renewed traction and opportunities, albeit slower growth in FY10.

    We believe positive momentum in the IT industry is evident from the job market scenario which appears to be reviving after a lull of over a year. As for TCS, the company like its peers has a renewed focus on the domestic IT market as the new growth driver. It is already running pilot projects for a crop advisory service to rural farmers on mobile phones.

    Movers and shakers during the week
    Company 18-Dec-09 24-Dec-09 Change 52-wk High/Low
    Top gainers during the week (BSE-A Group)
    Guj. NRE Coke 66 78 18.2% 79/17
    PTC 102 116 13.8% 119/55
    SAIL 209 237 13.4% 239/69
    Fortis Healthcare 115 129 11.9% 130/62
    Titan 1,271 1,416 11.4% 1,509/668
    Top losers during the week (BSE-A Group)
    Indiabulls Fin. Ser. 134 126 -6.0% 224/81
    Balrampur Chini 136 130 -4.6% 167/42
    Nestle 2,590 2,499 -3.5% 2,739/1,377
    Sterling Biotech 100 97 -3.4% 170/90
    Unitech 84 82 -2.8% 118/25
    Source: Equitymaster


    On the back of the improving outlook for the Indian economy, the Indian Finance Minister Mr. Pranab Mukherjee offered his view that India could grow at a much faster pace during the current fiscal. In fact, the FM believes that the GDP growth rate could be between the 7.5% to 8% mark for FY10. Also, he expects the economy to touch a growth rate of 9% to 10% within the next two to three years. However, he also added that the high level of inflation and fiscal deficit will remain a major challenge for the government.

    In addition, the FM added that the sustained economic growth is a high priority for the government. And as such, the government will not withdraw the fiscal stimulus, despite the faster growth in the economy. It is believed that the government will wait until the annual budget to consider withdrawing some of the fiscal stimulus measures. And so, the jinx finally seems to have been broken. The Sensex finally managed to go past its previous highest closing of the year. Something it had been trying in vain for more than two months now. Frankly speaking, until a couple of days back, very few people would have seen this coming. After all, days when the Sensex scales nearly 700 points in two days flat are very rare indeed. But the week gone by was witness to this very spectacle.

    And it wasn't just greater liquidity that was driving the index. Investors seemed to be enthused with the announcement by India's Finance Minister that the economy could end the year with a growth rate of 8%, an upgrade of important magnitude from the earlier projection of 7% or thereabouts. Furthermore, worries that RBI would hike interest rates have also died down a bit after assurances from the government that food prices, the main reason RBI was contemplating hiking rates, would start easing from January 2010 onwards. However, if inflation in other items also starts getting out of hand, then the RBI may have to step in and this in effect, poses one of the biggest risks to the current rally. Hence, investors need to be cautious to that extent.

     

     

    Equitymaster requests your view! Post a comment on "World markets rise as optimism returns". 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.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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 18, 2017 (Close)

    MARKET STATS