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Global Markets Ended on a Positive Note
Sat, 28 Jan RoundUp

Global markets ended the week on a strong note with most of the markets ending in the positive territory. Brazil and Indian markets were biggest gainers, with gains of 3.3% and 3.1% respectively. However, the UK and France markets were marginally down by 0.3% and 0.2% respectively.

During the week, Trump formally withdrew the US out of the 12 nation Trans-Pacific Partnership (TPP) trade deal, thereby distancing the US from Asian allies.

The TPP is a trade agreement signed (but not yet ratified) by twelve countries accounting for 40% of global GDP and 33% of global trade. The landmark deal was slated to reduce tariffs and boost trade among the signatories. Unfortunately, neither China - hailed as the global factory - nor India, are part of it.

With this move Trump aims to move US towards an era of bilateral trade. Instead of signing as a multi-lateral pact, Trump intends one-on-one trade deals with the countries. That would allow the US to quickly terminate the deal if the deals harms US in any manner.

In other news, Trump said that he will renegotiate North American Free Trade Agreement (NAFTA) at appropriate time. NAFTA enacts a free trade zone between the US, Canada, and Mexico. Trump said that he would move to withdraw NAFTA if no "fair deal" is forthcoming. He pledged to stop trade deals that harmed American workers. The US markets were up 1.8% for the week gone by.

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Back home, the Indian indices ended their weekly session on a strong note. The BSE Sensex was up 3.13% for the week, while the NSE Nifty was up 3.50%. The market stood strong throughout the week with market participants looking forward for a supportive Union Budget 2017. The market is expected to be volatile as budget comes within months of demonetisation and market participants are wondering what measures the government will take to stimulate the beaten up economy.

Key World Markets During the Week

On the sectoral indices front, Metals and consumer durable stocks led the gainers this week. There were no losers for the week.

BSE Indices During the Week

Now let us discuss some key economic and industry developments during the week gone by.

During the week, the Income Tax Department has issued guidelines to plug tax evasion by shell companies or foreign firms set up by groups in India to retain income outside the country.

The guidelines will be used to determine if an entity can be considered an Indian resident and taxed here.

The rules will come into effect from assessment year 2017-18, which essentially means the current financial year, dashing the hopes of industry, which expected their implementation from the next financial year.

The CBDT made it clear that the objective is to catch those avoiding taxes.

The imports of gold fell around 32% to US$ 17.7 billion in April-December of the current fiscal compared to US$ 26.4 billion of import in the corresponding period of 2015-16. The gold imports dipped by 48.49% y-o-y to US$1.96 billion in December month.

The softening prices of the precious metal in the domestic and world markets could be the reason for the fall in import. Cash crunch in the system due to demonetisation also impacted the inbound shipments.

Observing that cash crunch is taking a toll on gold demand in the short term, World Gold Council in the report said even genuine gold buyers are reluctant to buy wedding jewelry as there is panic after taxmen investigated some jewelers who had, immediately after demonetisation, created opportunities to convert old currency for fake or back-dated sales.

India is one of the largest gold importers in the world, and the imports mainly take care of demand from the jewelry industry. The country has imported 650 tonnes of gold in 2015-16. The fall in imports of precious metal is expected to keep a lid on the current account deficit.

According to a survey by the Reserve Bank of India (RBI), business sentiment in the manufacturing sector in India deteriorated in the October-December quarter. More so, the sentiment is said to further decline in the three months ending March.

The survey showed the level of optimism stood lower on parameters such as order books, capacity utilisation and imports during the second quarter of FY17.

While economic activity was affected after demonetisation, the survey did not have any responses on the impact of the notebandi. The manufacturing Purchasing Manager's Index stood down by 3.9% in November on a month-on-month basis. It was the biggest fall since March 2013.

Ahead of the Budget (Subscription Required), the Federation of All India Farmer Associations (FAIFA) has asked the government not to increase excise duty on tobacco in order to bring stability in farm prices of the crop. The non-profit organization representing farmers across the states, including Andhra Pradesh, Telangana, Karnataka and Gujarat, appealed to Finance Minister Arun Jaitley to avoid "the onslaught of heavy taxation on legal cigarette industry" and help bring stability in farm prices of tobacco.

As per a report by the World Health Organization (WHO), the tax incidence as a proportion of the retail price of cigarettes in India is still lower than countries such as Bangladesh, Sri Lanka and Thailand. Therefore, it is no surprise that the government committee has recommended a higher GST rate of 40% on tobacco and related products. The standard GST rate is in the range of 17-18%. Going forward, whether the implementation of GST benefit cigarette companies that have been subject to a plethora of tax rates, will be the foremost thing to watch out for

Movers and Shakers During the Week
Company20-Jan-1728-Jan-17Change52-wk High/Low
Top Gainers During the Week (BSE Group A)
Bhushan Steels50.0559.819.5%64/33
Adani Enterprises77.792.519.0%94/58
Top Losers During the Week (BSE Group A)
Ipca Labs566537-3.4%673/402
Piramal Enterprises1,7691,720-2.8%2,095/835
Source: Equitymaster

Some of the key corporate developments in the week gone by

According to an article in The Economic Times, Wipro Ltd has signed a pact to acquire Brazilian IT firm InfoSERVER SA for US$ 8.7 million to expand its presence in Latin America. InfoSERVER is an IT services provider focused on the Brazilian market and provides custom application development and software deployment services.

Reportedly, InfoSERVER will help Wipro in expanding its presence in the country's highly traditional and competitive banking, financial services and insurance market. Apart from this, it will provide invaluable domain and process knowledge about the sector.

This acquisition closely lines up with Wipro's vision to localise, expand its presence in the Latin American market and also become a significant partner of choice and an end-to-end IT services provider in the area. Going forward, whether the acquisition will provide Wipro the scale and key client relationships, especially in the BFSI domains will be the key thing to watch out for.

Larsen & Toubro's (L&T) construction arm, L&T Constructions has bagged orders worth Rs 12.9 billion across various business segments.

Reportedly, L&T's Heavy Civil Infrastructure Business has bagged orders worth Rs 10.7 billion. Further, a major innovation order in the underground metro space has been secured from Metro-Link Express for Gandhinagar and Ahmedabad (MEGA) Company for the design and construction of underground stations and associated tunnels.

Another order has been bagged for the construction of an iron ore berth at Paradip, Odisha. An order has also been won for the construction of a technology-driven intake well structure at Purushotapatnam, Andhra Pradesh. Under the Building & Factories Business, the company has received an order worth Rs 2.2 billion for the construction of a paint manufacturing facility at Vizag, Andhra Pradesh.

According to an article in The Economic Times, Kotak Mahindra International divested 2.1% stake in private sector lender South Indian Bank for an estimated over Rs 600 million through an open market transaction.

According to bulk deal data available with the BSE, Kotak Mahindra International sold a total of 28.5 million shares, amounting to 2.11% stake, in South Indian Bank. Further, the shares were purchased by Lavender Investments Ltd.

Kotak Mahindra International held a 2.11% holding in South Indian Bank, while Lavender Investments owned 2.82% stake in the private sector lender as of December quarter.

India's largest biopharmaceuticals firm Biocon Ltd announced today that the Ministry of Health (MoH), Malaysia, has awarded a three year contract, to its subsidiary, Biocon SDN BHD.

The contract is for the supply of recombinant human insulin (rh-Insulin) formulations manufactured at its large scale biopharmaceutical facility in Johor, Malaysia. Biocon's rh-Insulin is Malaysia's first locally manufactured biosimilar biologic product approved by the National Pharmaceutical Regulatory Authority of Malasiya.

Biocon SDN. BHD. has been awarded a MYR 300 million (Rs 4.6 billion) contract to be serviced over a period of three years for supplying rh-Insulin cartridges and re-usable insulin pens under the Malaysian Government's Off-Take Agreement initiative, which seeks to encourage local manufacturing of new pharmaceutical products thus lowering the country's reliance on imports and also enhancing the exports potential.

The contract is extendable for additional two years subject to approval by the Government of Malaysia.

Biocon will distribute insulins and insulin delivery devices through CCM Pharmaceuticals, a leading local pharmaceutical player which has an extensive supply chain network to service primary healthcare clinics and hospitals across Malaysia.

Biocon, is the first Indian company which is getting associated with the Malaysian Government to add value to the bio-technology sector.

In another news update, it was reported that, BSE's IPO has garnered over 50% subscription on Monday, the first day of the Rs 12.4-billion offering. The first IPO of calendar 2017 had received bids for 5.43 million shares out of 10.7 million shares on the block. Heavy demand was seen from retail individual investors (RII). Non-institutional investors (NIIs), which include high net-worth individuals (HNIs), subscribed to 12% of their quota limit.

The offer is a 100% book-building one, and 15.4 million shares are being sold in a price band of Rs 805-806 a share. The issue closes on 25 January.

Among the investors who were allotted shares in the pre-IPO placement include Goldman Sachs AMC, ICICI Prudential Mutual Funds, Kotak Mutual Funds, DSP Blackrock Alternative Investment Fund, Reliance Capital Trustee, among others.

Speaking of IPO market post-demonetisation, will 2017 see a revival in the IPO market? When demonetisation was announced in November 2016, it not only led to a correction in the Indian stock markets, but it also had an adverse impact on the primary markets. Many companies postponed their IPO offerings.

According to an article in a leading financial daily, Mahindra & Mahindra (M&M) will foray into Turkey with the acquisition of a 75.1% equity stake in farm equipment company Hisarlar Makina Sanayi ve Ticaret Anonim Sirketi (Hisarlar). The transaction is expected to close by April 2017 for the consideration of US$ 19 million.

Reportedly, the association will help in growing the farm equipment business (Subscription Required) in Turkey and Europe. The balance shareholding will be with European Bank for Reconstruction and Development (EBRD), 18.7%; and the founding Turkey family, 6.2%.

The move comes ahead of M&M's strategy to globalize aggressively and expand its portfolio to include various new categories of farm machinery. This acquisition is an important milestone in for M&M in its globalization journey.

And here's an update from our friends at Daily Profit Hunter...

The Nifty-50 traded strongly during the week. On Monday, it opened the session lower but smartly recovered its losses to end the session with a 41-point gain. On subsequent days, the index opened their sessions with an upside gap and closed with gains. During the week, the Nifty-50 index closed above its resistance levels of 8,550-8,600. The resistance offered by the gap area was also closed by the bulls on Friday's session. For the week, the Indian markets traded on a strong note, ending with 3.5% gains. You can read the detailed market update here...

Nifty-50 Clocked 3.5% Gains
Nifty-50 Clocked 3.5% Gains 

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Mar 16, 2018 (Close)