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Global Markets Remain Mixed
Sat, 17 Mar RoundUp

Sentiments in the global financial markets remained mixed even as persistent worries about a global trade war, particularly between the US and China, kept Asian markets on the edge. The Chinese index was down 1.1% in the week gone by. Even the Indian equity markets were down 0.4% after the exit of a key ally from the ruling coalition of the Modi government upped the political risk. However, market indices in Hong Kong, Japan and Singapore managed to post weekly gains.

The US markets were up by 1.5% in the past week on the back of upbeat economic data. The industrial production rose 1.1% in February, its fastest pace in four months. Even the University of Michigan's consumer sentiment index jumped to a 14-year high in March. However, major personnel changes in the Trump administration upped US political worries. These included the departure of Rex Tillerson as secretary of state, and the naming of Lawrence Kudlow as the director of the National Economic Council.

Back home in India, Andhra Pradesh's Telugu Desam Party moved a no-confidence motion against the government in the Lok Sabha on Friday, after party president N Chandrababu Naidu announced the party's exit from the National Democratic Alliance. This acted as a double whammy for the BJP that lost key by-polls in Uttar Pradesh and Bihar last week. On Friday, the BSE Sensex fell by 509 points or 1.5% to end at 33,176.

Key World Markets During the Week

On the sectoral indices front, IT and metal stocks were the major losers whereas telecom and consumer durable stocks were among the gainers during the week.

BSE Indices During the Week

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

Data released by the Central Statistics Office showed India's industrial production grew at a robust pace for the third straight month, at 7.5% in January.

The factory output growth was seen on the back of a robust growth in the manufacturing sector which showed a growth of 8.7%. The index expanded in the month of January compared to a 7.1% growth in December and 8.8% in November. Meanwhile, retail inflation cooled to 4.4% in February compared to 5.07% in January.

Even the automobile sector remained upbeat as passenger vehicle sales in India continued their growth momentum last month with new models such as the Maruti Suzuki Swift, Hyundai Verna and Tata Nexon pushing up volumes.

As per the data released by industry body Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales increased 7.77% to 2,75,329 units in February. Commercial vehicles and two-wheelers also had a strong show with sales of commercial vehicles up by 31% to 87,777 units, and those of two-wheelers up by 23.8% to 16,85,814 units.

Further for the first nine months of FY18 at least, the auto industry has done well to grow in double digits after some lean years.

Vehicle sales grew by 11.3% YoY during this period. The best performing of the lot were commercial vehicles (CVs), volumes of which grew by 15% YoY. Two-wheelers also did well growing by around 12% YoY.

India's trade deficit widened in February over the same month last year but narrowed from an over four-year high last month. This came on the back of growing exports and moderating imports.

Trade deficit, the gap between exports and imports, widened 36.4% from a year ago at US$12 billion, according to data released by the commerce ministry. The deficit stood at US$16.3 billion last month, the widest since May 2013.

India's exports rose 4.5% year-on-year to US$25.8 billion in February, while imports grew 10.4% to US$37.8 billion in the same period. The government is looking at a 6.5% export growth for the year, the reports noted.

Growth was led by increasing outbound shipments of petroleum products, and organic, inorganic chemicals. Exports of gems and jewellery, which is typically the second major contributor to the bill, declined 5.14%. Engineering goods exports saw a marginal decline last month.

On the import front, shipments of crude oil, coal, pearls and precious stones inflated the bill. Gold imports declined for the second straight month, while machinery imports grew.

On the banking front, the Reserve Bank of India (RBI) decided to scrap letters of undertaking (LoUs) and letters of comfort (LoCs) - instruments that were regarded as bank guarantees and recently became central to the PNB bank fraud.

Note that the recent Nirav Modi Punjab National Bank (PNB) fraud case included issuance of Letters of Undertaking (LoUs) to benefit Nirav Modi and his uncle Mehul Choksi.

Movers and shakers during the week
Company9-Mar-1816-Mar-18Change52-wk High/Low
Jaiprakash Associates142149.8%30/9
MMTC Ltd466747.2%102/46
63 Moons Tech8110933.6%166/54
Jaiprakash Power5619.0%4-Oct
Syndicate Bank546315.5%96/52
     
Top Losers During the Week (BSE A Group)
Gitanjali Gems1612-21.8%105/12
Coal India305279-8.5%317/234
Apollo Hospitals1,1501,070-6.9%1,357/959
TCS3,0352,826-6.9%3,255/2,255
ABB India1,4351,341-6.6%1,744/1,175
Source: Equitymaster

Some of the key corporate developments in the week gone by.

Wipro will divest its hosted data centre services business to Chicago-based hybrid IT services provider Ensono for US$405 million (about Rs 26.5 billion). Wipro will transition eight data centres and over 900 employees to Ensono. The acquisition significantly expands Ensono's geographic footprint and global service capabilities.

Hosted data centre services is one of the three businesses that became a part of Wipro when it acquired Infocrossing Inc in 2007.The other two businesses -- Medicare & Medicaid services in the health insurance space and ERP implementation services -- have been integrated with other Wipro businesses and are not part of this divestment, the reports noted.

As part of the agreement, Wipro will make an investment of US$55 million in Ensono's combined entity. The two have signed a long-term partnership agreement to jointly address the hybrid IT need for Wipro's new and existing enterprise customers. Last year, Ensono acquired Attenda, a UK-based pure-play provider of critical applications and hybrid IT-managed services.

IT major Infosys will set up a new technology and innovation hub in Hartford, Connecticut, and hire 1,000 American workers in the state by 2022. Last year, Infosys had announced setting up of four such hubs and hiring about 10,000 locals in the US over the next two years.

The move was also seen as a bid to woo the Trump administration that has been critical of outsourcing firms for "unfairly" taking jobs away from the US workers. The hub in Connecticut will have a special focus on insurance, healthcare and manufacturing.

Tata Sons sold a 1.48% stake in Tata Consultancy Services (TCS), to raise Rs 81.2 billion (US$ 1.3 billion) as it looks to retire debt and invest in group firms across sectors such as auto and steel.

Further, TCS witnessed a series of block deals, in which around 25.4 million shares or 1.5% stake of the company changed hands. After the block deal, Tata Sons will hold about 73% in TCS, which generated US$18 billion in revenues in fiscal 2017.

Strides Shasun has received approval from the US health regulator for its generic Efavirenz tablet used for treatment of HIV Type-1 infected adults and adolescents.

The company received approval of Efavirenz tablet USP, 600 mg, a generic version of Sustiva Tablets of Bristol-Myers Squibb. The US market for the above drug is approximately US$ 115 Million and Strides is only the second generic company to get the approval for the product under the Para IV route. As per the news, the product will be manufactured at the company's oral dosage facility in Bengaluru and will be marketed by Strides Pharma.

Indian Oil Corporation Ltd and Tata Motors have launched the trial demonstration of the country's first hydrogen fuel cell bus. The project is being executed under the partial financial support from the Department of Science & Industrial Research, Ministry for Science & Technology and the Ministry for New and Renewable Energy.

The vehicle will be fuelled at the country's first hydrogen dispensing facility at R&D Centre of Indian Oil. It will be subjected to long duration trials to understand the durability and efficacy of the fuel cell technology for mobility applications.

Housing Development Finance Corporation (HDFC), a mortgage lending firm, has decided to offload a little over 4% of its holding in its subsidiary HDFC Asset Management Company through an initial public offering (IPO). HDFC currently holds 57.5% in HDFC AMC, while Standard Life Investments has 38.2% stake. HDFC AMC owns HDFC Mutual Fund.

HDFC had approved the IPO of HDFC AMC and offer-part of its shares to the public in one or more tranches so that its holding remains at least 50.01% in the AMC arm.

To learn how to navigate the treacherous world of IPOs, do read our special report on finding money-spinning IPOs.

L&T's construction arm -- L&T Construction -- has bagged orders worth Rs 25.97 billion across various business segments. The Transportation Infrastructure business has secured an order worth Rs 10.47 billion. The company has bagged a prestigious order has been received from the National Highways Authority of India (NHAI) for the construction of the 8.7 Km long Dwarka Expressway (Package - IV) in the state of Haryana on EPC mode. The Water & Effluent Treatment Business has secured an order worth Rs 9.49 billion. Besides, the Buildings & Factories Business has secured an order worth Rs 6.01 billion.

The Enforcement Directorate on Friday filed a charge sheet against former Andhra Bank director Anup Prakash Garg in connection with a Rs 50 billion bank fraud involving Sterling Biotech Ltd (SBL) of the Sandesara group of companies. The ED claimed that the Sandesaras had paid over Rs 1.52 crore to Garg as quid pro quo for facilitating bank credit and other transactions.

The above incident adds to the recently cropped issues in the banking sector and their ever-growing pile of misery. Note that the share of large corporates, in total advances of the banking sector, has almost remained unchanged over past three years (at an average of 55%).However, their contribution to incremental slippages has been huge. At one point, the big corporate borrowers accounted for nearly 90% of total NPAs of the sector

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

The Nifty 50 Index traded on a volatile note during the week.

On Monday, it opened the session gap up and rallied nearly 200 points. The positive momentum continued until the next day where the index hit a high of 10,478. But it couldn't sustain its upward trend for long and slipped lower for the remainder of the week. Today, the index is down 165 points, finally closing the weekly session 0.31% down.

Last week, the index found a strong support near 10,000 - 10,100 zone (previous resistance now support). The 200 day moving average (DMA) also acted as a good support for the index.

It bounced up from these support levels, but it is now back near the 200 DMA.

So can the index again find support from the 200 DMA?

Or will it continue to slip lower? In that case, 10,000 is the level to watch out for. You can read the detailed market update here...

Nifty 50 Index Trades Volatile
 Nifty 50 Index Trades Volatile

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Read the latest Market Commentary


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