US witnessed best quarter in 14 years

Sat, 31 Mar RoundUp

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The world stock markets ended the week on a mixed note. The US stock markets witnessed the best quarter in 14 years. Positive economic data released towards the end of the week resulted in the markets closing the week higher by 1%. As per latest reports, US consumer spending in February rose the most in the last seven months and the consumer confidence index also moved up. More economic data is expected next week and this would determine which way the global markets would be heading.

The Indian stock markets were marginally up by 0.2% during the week. However, it brings some relief to investors after 5 consecutive weeks of losses. Major movement was seen on the last day of the week when the Finance Minister announced that there will be no tax liability on Participatory Note holders. These participatory notes account for a major chunk of investments into the Indian stock markets.

Amongst the other world markets, Japan (up by 0.7%) and Singapore (up by 0.7%) were the only gainers. China had the worst performance during the week and was down by 3.7% followed by Brazil (down by 2%).

Source: Yahoo Finance

Sectoral indices registered a mixed performance during the week. Pharma (up by 2.5%) was the top performing sector followed by FMCG which inched higher by 2%. Power stocks were the worst sufferers of the lot, down by 2.1% during the week.

Source: BSE

Let us now take a look at key developments during the week. In the world of Indian pharmaceutical companies, there was some positive news this week. Indian drug majors Lupin, Dr Reddy's and Sun Pharma have received approvals from the US Food and Drug Administration (FDA) to sell some generics in the American market. The tablets that have been approved are quetiapine fumarate tablets which are generic equivalent of AstraZeneca's Seroquel Tablets. Quetiapine is a psychotropic agent and is used to cure mental disorders and depression. The tablets are available in 25 mg, 50 mg, 100 mg, 200 mg, 300 mg and 400 mg. It may be noted that AstraZeneca's Seroquel Tablets sales amount to US$ 4.6 bn.

Gas Authority Of India Ltd. (GAIL) is planning to commission the first phase of its Kochi-Mangalore pipeline project by FY13. The project is divided into two phases and GAIL expects to complete the second phase by FY14. In the first phase, GAIL will lay 40 km pipeline in the Kochi region. In the second phase, it is expected to lay pipeline form Kochi to Bangalore/ Mangalore. Work is in full progress for the first phase completion. Out of planned 40 km pipeline, 33.5 km pipeline has already been welded and lowered so far.

In some more news from the energy sector, government owned oil marketing companies are likely to receive Rs 150 in the form of oil subsidies by March 2012. These companies are Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL). The subsidy would bring down their combined borrowings. Indian Oil has borrowings of Rs 780 bn and BPCL of Rs 270 bn. However, HPCL's borrowings recently touched an all-time high of Rs 310 bn. The delay in grant of cash compensation on capped sales of petroleum products resulted in these companies having to borrow money. The funds borrowed are being used towards meeting working capital requirements.

Auto major Ashok Leyland is thinking of getting into the aerospace business. The auto company is considering both the civil and the defence sectors. Ashok Leyland is likely to set up a separate company for this venture. Talks are on with foreign partners for technological partnership regarding this. The management stated that they have not yet decided on the nature of association though. This means that they could go for either an equity partnership or a joint venture. This decision would depend on the types of products that the company wants to make. It may even look at existing group companies for synergies in starting aerospace business.

Movers and shakers during the week

Company	23-Mar-12	30-Mar-12	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
IVRCL Ltd	57	66	16.0%	96/28
Ranbaxy Lab	412	469	13.9%	565/379
P&G Hygiene	1,992	2,235	12.2%	2167/1600
Century Textiles	330	369	11.7%	389/218
Voltas	101	112	11.1%	187/73
Top losers during the week (BSE-A Group)
Indiabulls Financial Services	240	208	-13.4%	241/120
Koutons Retail	15	13	-12.8%	40/13
KSK Energy	62	55	-10.4%	123/35
Housing Dev. Infra	95	85	-10.1%	195/54
Mahindra Finance	744	669	-10.0%	808/590

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

Coal India management has been blamed by a UK investment fund, The Children's Investment (TCI) fund for harming the public sector undertaking (PSU) thereby affecting shareholder returns. TCI is a minority shareholder in Coal India. The fund has written to the company stating that the management is not performing their duty properly and lacked required leadership abilities. It also alleged that the Indian government had sold their shares in Cola India IPO in 2010 by misrepresenting the facts. Management of Coal India responded to these allegations stating that these do not elicit any comments/ remarks from the coal mining company. Meanwhile, woes of power companies continue as they face shortage of coal. The power companies suffered loss amounting to 8.7 bn units during April 2011- February 2012.

Prices of petrol may be hiked by Rs 5 a litre from next month onwards. The state run oil companies will be meeting on Saturday to review the fuel prices and a final decision may come out of this meeting. It may be noted here that these companies are incurring a loss of Rs 7 per litre on petrol. However, since these are owned by the government, an approval from the latter is necessary before executing any such price hikes. The companies have been demanding that they should either be allowed to raise prices or the government should compensate them for revenue losses. They are seeking Rs 50 bn as compensation for revenue losses on petrol.

Owing to the recently held state elections in 5 Indian states and the Union Budget 2012, the Indian government had put some important issues on the back burner. This was done in view of protecting the vote bank of the government. Now that these events are over, we need to wait and watch if and when the government gets back on these. Also, we need to see whether the Reserve Bank Of India (RBI) reduces interest rates further in April. All these would determine the course of the Indian stock markets in the near term.