Barring India, all the major global stock markets ended the week in the green. The US stock market hit new highs, on back of positive comments from Federal Reserve Chair, Janett Yellen. Janett indicated that central bank will raise interest rates more slowly than planned. This event had positive impact on the global markets too.
China was the biggest gainer for the week (up 7.2%). The markets closed above 3600 levels, highest in last seven years. The Japan markets hit 15-year high levels as Yen softened against the US dollar. Among the European markets, the UK stock markets touched their life-time high levels breaching 7K levels. Lower interest rates have revived hopes of breakthrough in Greek debt crisis which is propelling rally in European stocks.
The Indian stock markets ended the week in red. The downward trend in the market pulled down the indices to one month lower levels. While buying activity was witnessed post Fed's comments, however Indian indices later lost the streak and slipped into red.
Now let us discuss some of the key economic and industry developments in the week gone by.
The Government has issued a cabinet note to sell 10% of NTPC for disinvestment in the next financial year. The government plans to raise nearly Rs 695 bn that would cover nearly 3.9% of the fiscal deficit target. At 10% of NTPC on sale, the Government can raise about Rs 126 bn at current price. According to a leading financial source, the official proposal is yet to be declared, however, the stake might be sold at a discount of 4% - 5% to retail investors. Further, the government has created a list of PSUs which would be divested in the next financial year. The list starts with BHEL. The total divestment is expected to be Rs 410 bn the next fiscal. Currently the government has a 63.06% stake in BHEL. In March 2014, the government had sold 4.66% stake to LIC for Rs 18 bn.
The Wholesale Price Index (WPI) for the month of February touched an all-time low with -2.06%. This is the fourth consecutive instance when there has been a deflation in prices. Three groups namely primary articles, fuel & power and manufactured products are primarily responsible for the decline in prices. Primary articles (index weight - 20%) fell 1.9% while fuel & power (index weight - 15%) fell 4.5% and manufactured products (index weight - 65%) fell 0.3%.
Now let us move on to some of the key corporate developments of the week gone by.
According to a leading financial daily, Tata Motors is all set to introduce at least 6 utility vehicles to regain the lost share. The company's performance in the domestic space has been dismal, however, it has been above expectation. The company is planning to introduce Premium Crossover, Sub-4 metre SUV, Rugged SUV and Premium SUV till 2016 and second half of 2017. Tata Motors reportedly lost its market segment of affordable cars to Mahindra & Mahindra.
IT major Wipro bagged a 5 - year deal from a US based utility company named Greater Cincinnati Water Works (GCWW). The financial details were not disclosed. Wipro will take care of GCWW's Customer Relationship Management process which will include billing and service bureau operations. GCWW is a provider of 113 million gallons of water to 1 million people across Ohio and Kentucky.
The engineering giant, Larsen and Toubro has secured orders worth Rs 12.55 bn which included designing of factories, construction of building and power transmission and distribution. Rs 8.25 bn is attributed to the orders that involve design and construction while the remaining is attributed to power distribution and transmission. Internationally, the company also bagged orders for setting up a power substation.
As per a leading financial daily, Cairn India is feeling the heat of a slump in crude oil prices. Due to the slide in prices, the company has cut its capex by 60% to $500 m as compared to $1.2 bn earlier. The company has also laid off 250 employees and is re-negotiating drilling contracts to curtail costs. To add to this, the company has also been slapped with a tax demand of Rs 204.9 bn for not deducting withholding tax on capital gains made by its former parent, Cairn UK Holdings. The company is also awaiting the extension of the production sharing contract of its Rajasthan field.
Cadila healthcare recently announced the company has launched a new drug to treat Hepatitis C. The drug is used as Oral therapy and is named SoviHep. The drug would be marketed by Zydus Heptiza. Zydus and Gilead Sciences have partnered each other to market and sell this drug in over 91 countries that also include India. The drug would be useful in India as it is a home to 10 mn Hepatitis C patients.
State Bank of India went online to auction its 300 assets recently. The value of these properties is approx. Rs 12 billion. However, so far it managed to sell 130 properties whose value turned out to be Rs 1 billion. The 300 properties included spaces like factory buildings, office, shops and residential apartments spread over 25 cities in India. This was a maiden initiative by the bank to dispose its bad or distressed assets through e-auction.
On the macro front geopolitical events will continue to influence the stock market direction. Further, the fact that the US central bank will change the rates, that have been left untouched for the past 6 years, sooner than later, is something that markets should be worried about. This may bring opportunities to invest in solid companies with a reasonable margin of safety.