World stock markets displayed mixed signals during the week. Most of the Asian stock markets closed the week in the green while the US and the European markets traded lower. The US markets were mostly down on disappointing Chinese economic data. The fact that the Asian country's economy grew at the slowest pace in almost 3 years (GDP grew by 8.1% in the first quarter) coupled with concerns over rising borrowing costs in Spain resulted in the US markets falling by 1.6%.
The Indian stock markets were down this week on global cues regarding rising borrowing costs in Spain and lower than expected GDP growth in China. Also disappointing results (quarter ended March 31, 2012) from IT bellwether Infosys on Friday resulted in the stock markets falling by more than 2%.
Amongst the other world markets, most of the stock markets ended the week in the red. However, Asian stock markets (excluding Japan) managed some gains. China in fact was the top gainer up by 2.3%. Among the losers, France (down by 3.9%) and Germany (down by 2.8%) fell the most.
Sectoral indices registered a mixed performance during the week. FMCG (up by 3.6%) was the highest performing sector followed by phrama stocks (up by 2%). IT stocks recorded huge fall of nearly 11.5% during the week on the back of disappointing results for the quarter ended March 2012 and lower guidance from Infosys.
Let us now take a look at key developments during the week. Coal India is expected to get into fuel supply agreements (FSAs) for a total capacity of 28,000 megawatt. The coal mining company could get into such an agreement with as many as 50 companies including the likes of National Thermal Power Corporation (NTPC) and Reliance Power. This follows a Presidential directive to Coal India to supply a minimum assured quantity (at least 80% of the committed coal delivery) of fuel to power companies. Leading power firms that have major capacity addition plans are expected to benefit out of these FSAs.
Leading telecom player Bharti Airtel is going to launch fourth generation (4G) services in India soon. The company plans to initially start with these in the four circles of Maharashtra, Karnataka, Punjab and Kolkata. Later on, broadband wireless access (BWA) services will be launched in three other circles also. With this Airtel will become the first Indian company to deploy a commercial high-speed wireless broadband service in the country. Airtel has paid Rs 33.1 bn for 4G services. It may be noted here that Reliance Industries too is planning to launch BWA services in some circles very soon.
Automobile major Mahindra and Mahindra (M&M) has signed an agreement with Karur Vysya Bank through which its customers would get financing form the bank. These services will be available at M&M's branches. M&M has a strong dealer network of 250 people and Karur has a branch network of more than 450 branches. This financier agreement between both would help the companies leverage their strengths. It is interesting to note that Karur has plans to expand its operations in commercial and passenger vehicle financing segment. This agreement is a step towards the said objective.
We will now discuss the other important corporate/economic events that took place over the week.
Result season has begun for the quarter ended March 31 for Indian companies. IT company Infosys declared numbers for the fourth quarter of FY12 (4QFY12) as well as full year results for the financial year 2011-2012. The increase in sales was 22.7% on a year on year basis for the full year. However, on a QoQ basis, revenues declined by 4.8%. Operating margins for the quarter declined to 29.9% as compared to 31.2% in the 3QFY12. For the full year, operating margins were down by 0.5% at 29%. Higher costs of sales as a percentage of total revenues resulted in lowering of operating margins. Net profits were up by 21.9% YoY during FY12 on account of higher other income. The company has declared final dividend of Rs 22 per share. A special dividend of Rs 10 per share has also been declared by Infosys.
Indraprastha Gas Limited (IGL) closed lower during the week. The stock was in the news because the Petroleum and Natural Gas Regulatory Board (PNGRB) decided to lower the network tariff of IGL by 63% and reduced compression charges by 59% for compressed natural gas (CNG) supplied by it. IGL has filed a petition in the high court regarding this and the hearing date of the same is April 19, 2012.
Maruti Suzuki's recently launched first global compact multi-purpose vehicle Ertiga has received 400 booking orders from Maharashtra on the first day of its launch itself. This is along with the numerous queries that the automaker has received for this vehicle. As per the management Ertiga will be popular among the urban families that require more space and flexibility as compared to a sedan but do not want bulky and expensive utility vehicles. There are plans to take the Ertiga to the other Southeast Asian markets too.
Earnings season has begun on a sour note with IT major Infosys registering fall in both sales and net profits. The management has given a lower guidance too. While this does not bode well for the IT sector in particular and overall markets in general, we will have to watch out for the forthcoming results to understand how the markets will behave in the near term.