Stock markets around the world mostly traded in the positive territory in the week gone by. The European markets were the biggest gainers ahead of the European Central bank's launch of the 60 bn euro a month bond buying program. The German lawmakers approved of a four-month extension of Greece's bailout. The German and France indices ended higher by 3.2% and 2.5%, respectively for the week. The UK markets were up by 0.5%. However, the US markets were marginally negative after jobless claim data showed a rise in unemployment along with a 0.7% drop in consumer price index.
Asian equity markets remained mixed. The Japanese index was the biggest gainer holding on to a fresh 15-year high amidst inflation easing for the sixth month in a row in January. The Chinese index was up by 1.9% after the central bank has been loosening monetary policies.
Back home, the Indian stock markets were open on Saturday on account of the Union Budget 2015. The index closed the week ending Saturday on a firm footing, up 0.4%.
The banking stocks were the biggest gainers after the Union Budget announced a comprehensive bankruptcy code. The other gainers were realty and capital goods. Among the pack of losers, FMCG and consumer durables witnessed maximum selling pressure.
Now let us discuss some of the key economic and industry developments in the week gone by.
The government released the Economic Survey 2014-15. As per the survey, the country's GDP growth rate has been forecast at 7.4% for FY15 and 8.5% for FY16. The optimistic outlook has been projected on the basis of the government's commitment to reforms, expectations of a normal monsoon, improvements in price and external sector scenarios including the possibility of international crude prices remaining benign. However on a cautious note, the survey has said that given the preliminary and provisional nature of information, after the base year was shifted from 2004-05 to 2011-12, the long term macroeconomic trends are difficult to analyze. The survey has said that the government will stick to its fiscal deficit target of 4.1% of the GDP in FY15. Despite weakness in revenue collection and delayed disinvestment, the new excise on diesel and petrol, reduced subsidies along with expenditure reduction are likely to ensure fiscal discipline.
India's National Solar Mission (NSM) is expected to receive a major boost. The economic survey has stated that the NSM's target would be scaled up five times from 20 GW to 100 GW by 2022. The investment required for the same would be about US$ 100 bn. Over the next five years, the sector is likely to produce business opportunities of about US$ 160 bn. If achieved, it would go a long way in achieving multiple goal of energy production, job creation and improving air quality standards.
The Union Budget 2015 announced measures to address a number of critical issues such as infrastructure development, allocation towards government-sponsored employment scheme (MNREGA), bankruptcy laws, monetization of gold, social security system for citizens and black money. India Inc. was the biggest beneficiary as it received goodies in the form of reduction in tax rate to 25% over the next four years and a likely implementation of Goods and services Tax (GST) by April 2016. Although there has been no change in the tax exemption limits, the deductions in medical spends, travel allowance and pension savings provided some relief to the salaried middle class.
Now let us move on to some of the key corporate developments of the week gone by.
The proposed merger of Kotak Mahindra Bank and ING Vyasa Bank has been given a green signal by the Competition Commission of India. Kotak Mahindra had announced the buyout of ING Vysya Bank in an all-stock deal in November last year. As per the order, the merger scheme provides that for every 1,000 shares held by the shareholders of ING Vysya, 725 shares of Kotak Mahindra will be allotted. Reportedly, the merger would make Kotak Mahindra the fourth largest lending bank in the country.
Lupin is facing regulatory issues raised by the US FDA with respect to its Pithampur plant. The US regulator has issued the company Form 483 and pointed out 6 observations with respect to the plant. The issue of Form 483 means that the company can continue to sell products from that plant to the US market. But it needs to address the concerns raised by the US FDA, failure of which can lead to a warning letter and in more serious cases an import alert. As far as Lupin is concerned, the company has received one drug approval and two site-transfer approvals from the Pithampur plant since the FDA audit. The company has recently entered into a joint venture with Bangalore based clinical trial management firm Acceliant.
Bharat Forge has won a multi-year contract from Boeing Commercial Airplane. The contract is for the supply of titanium forgings for wing components for the next-generation 737 and 737 MAX. The company will begin by supplying pre-machined forgings from its facilities in Pune and Baramati to Boeing in the first quarter of 2016. Bharat Forge has been working on reducing its dependence on the auto segment and has entered into the highly lucrative non-automotive forgings market in a big way, where it will cater to the needs of industries like conventional and non-conventional energy, aerospace, oil and gas exploration, infrastructure and metals and mining. Bharat Forge is targeting revenues in excess of US$ 100 m per annum from the aerospace sector alone.
ITC is set to acquire Park Hyatt Hotel in Goa after winning a bid. The hotel owned by Blue Coast Hotels was put up for public auction by IFCI Ltd for Rs 5.15 bn. ITC has been scouting for acquisition opportunities in the hospitality industry for over a decade. Over the years, the company has acquired nearly 15% stake in EIH, the flagship of the Oberoi Group, as a strategic investment.
Tata Power has entered an agreement with Siberian Coal Energy Company (SUEK). Under the agreement, both Tata Power and SUEK will cooperate on identifying and targeting opportunities in the energy sector in Russia and other geographies of common interest. Tata Power generates about 8,621 MW of power of which 7,407 MW is from thermal power generation. Reportedly, the SUEK delivers coal to more than 30 countries all over the world.
In line with Godrej Consumer Products Ltd's (GCPL) aim of scaling ownership in the Darling business, the company has increased its stake in Darling South Africa and Mozambique businesses to 90%. This is. The Darling Group has a presence in 14 countries and sells hair extension products under the brands Darling and Amigos. The company has recently acquired South Africa's hair extension business Frika Hair to consolidate its market share in South Africa. As per the company, the South African business currently contributes revenues of $ 2 bn. GCPL had acquired 51% stake in Darling South Africa and Darling Mozambique in 2011.
The Union Budget has shown its keen focus for a reforms-led economic growth in future. Nevertheless, investors should still not lose track of fundamentals and have a bottom-up approach while investing in stocks for the long term