An uneventful Budget disappoints all

Sat, 17 Mar RoundUp

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The world stock markets except China closed the week on a positive note. The European markets in particular showed a very positive performance after investor focus shifted from Greece to global growth. In the US too, markets posted their biggest gains of year during the course of the week. Federal Reserve's announcement regarding improving of the economy along with continued fall in unemployment triggered positive investor sentiments.

The Indian stock markets traded positive for most part of the week. However, budget anxiety and then later on a dull budget from the Finance Minister resulted in the markets ending on a lower note. The markets were down by 0.2% for the week ended March 16, 2012.

Amongst the other world markets, China (down by 1.4%) was the only stock market to close the week in the red. European markets in particular showed positive performance led by Germany (up by 4%) and France (up by 3.1%).

Source: Yahoo Finance

Among the sectoral indices, there was a mixed performance. Most of the sectors ended the week in the red with consumer durables (down by 2.2%) being the top losers. However, FMCG stocks managed to close the week higher by 2.9%.

Source: BSE

Let us now take a look at key developments during the week. The Union Budget 2012-13 was presented during the week. The budget turned out to be as lackluster as it could get. Apart from hiking the income tax exemption limit from Rs 1.8 lakh to Rs 2 lakh, there was nothing in the budget to excite the common man. We may note here that continuously high inflation has been burning a hole in the pockets of individuals and the country was hoping for some measures from the Finance Minister. However, the budget turned out to be a non-event even for the various sectors in trouble that were seeking some reforms.

Earlier during the week, Reserve Bank Of India (RBI) kept the key rates of repo, reverse repo and cash reserve ratio unchanged during its mid-quarter policy. The central bank however hinted at further lowering of interest rates but refused to give a time frame for the same.

Now let us take a look at key corporate events during the week. Pharma major Ranbaxy declared that it has opened a new production facility in Morocco. This will help Ranbaxy in having a direct presence in the North African phrama market. The facility has been successfully audited by the Moroccan Health Authorities. It may be noted here that Moroccan phrama market is pegged at US$ 1 bn. Ranbaxy wants to use this new plant as its base to cater to the requirements of the African countries. Presently, Ranbaxy has 2 other manufacturing plants in Africa located in Nigeria and South Africa. The phrama company has been facing trouble from its US operations and wants to strengthen its presence in other regions to deal with this.

Tata Motor's owned Jaguar Land Rover (JLR) has been in the news during the week for several reasons. First of all, the company wants to introduce crossover vehicles that will be a mix between a sedan and a sports utility vehicle. The company it seems is overwhelmed with the response that it got for its Jaguar Sportbrake XF that it unveiled at the recently held Auto Expo. However, it does not want to explore the idea of delivering pure SUVs from the Jaguar brand as of now. In another development, JLR is thinking of starting to assemble its luxury cars in India over next 3-5 years. The auto company feels that the demand is low at present but with demand rising in the future, it would like to explore this option for sure. Total sales of Jaguar and Land rover vehicles in India was 891 units in 2010-11 as against 242 units sold last year.

Titan Industries is planning to expand its lens manufacturing plant in Chikkaballapur, Karnataka. The retailing company wants to increase the existing capacity from 1000 lens a day to about 1400 lens a day in next couple of months. The company is in an expansionary phase and wants to increase the number of its outlets too. It is planning to more than double its Titan Eye Plus multi-brand eyewear shops from 204 to 500 within 2 years. It is looking at increasing the number of Spexx stores as well and is ready to tie-up with organized hospital chains for this business.

Movers and shakers during the week

Company	9-Mar-12	16-Mar-12	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Voltas	118	129	9.0%	187/73
Jet Airways	294	319	8.5%	515/172
CESC Ltd	285	308	8.0%	353/189
IRB Infra	184	198	7.4%	230/125
United Spirits	540	579	7.2%	1109/492
Top losers during the week (BSE-A Group)
NMDC Ltd	189	158	-16.4%	299/140
Tech Mahindra	684	607	-11.3%	787/540
Biocon Ltd	270	241	-10.9%	386/246
Koutons Retail	17	15	-9.7%	40/15
Lanco Infratech	21	19	-9.4%	45/9

Source: Equitymaster
We will now discuss the other important corporate/economic events that took place over the week.

Punjab National Bank is looking at a capital infusion of around Rs 23.6 bn. Of this, Life Insurance Corporation of India (LIC) is expected to provide Rs 10.75bn. The balance will be funded by the Indian government. This will be utilized towards maintaining the PSU bank's financial health and allowing flexibility to its operations. However, the management has denied any adverse impact from the telecom scam to its finances.

In some more news from the PSU banking space, in his budget statement, the Finance Minister proposed setting up of a company to hold the government's stake in banks. This will help in overcoming the problem of periodic capital investment in such PSU banks by the government that disturbs its fiscal calculations. It may be recollected here that the government has to often rely on LIC for funding these public sector enterprises. It had injected around Rs 80 bn in such banks to ensure they had sufficient capital with them.

Over the last few weeks, investors were hoping that the Union Budget could set the direction of the stock markets for some time to come but it failed to bring about the reforms that we all had been hoping for. However, the new Rajiv Gandhi Equity Savings scheme that would allow for some tax benefits on equity investments by first time investors could be positive for the Indian stock markets in the longer run. It could help in bringing in more domestic investor money into the stock markets for long term.