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Rupee concerns loom large on Indian stock mkts
Sat, 5 May RoundUp

It was a disappointing week for world stock markets in general and US markets in particular. US in fact saw the worst week of the year on weak economic data regarding the services sector. Europe has been the cause of worry for investors world over due to several debt crises. It now seems braced for change as people in France and Greece go out to vote. Going forward, the European election results are expected to chart out the direction of the world stock markets.

The Indian stock markets closed the week 1.8% lower. Indian Rupee continued to fall and there were concerns about General Anti-Avoidance Rule (GAAR) in the Finance Bill too. India is reviewing its Double Taxation Avoidance Treaty with Mauritius as it is largely being misused by global investors. All this combined with weak sentiments in Europe and American markets resulted in the fall in Indian stock markets this week.

Amongst, the other world markets, mostly all ended the week on a sour note. Germany (down by 3.5%) and France (down by 3.2%) were the top losers. However, Asian stock markets except Japan (down by 1.5%) managed to stay in the positive. Amongst these China was the top performer gaining by almost 2.3%.

Source: Yahoo Finance

There was a mixed performance amongst the sectoral indices. While IT (up by 3%) led the list of gainers, Capital goods (down by 2.5%) and automobiles (down by 4.8%) were the top losers.

Source: BSE

Let us now take a look at key developments during the week. Steel consumption in India is expected to improve after it witnesses slowdown in 2011. The growth in steel consumption is likely to be in line with the growth in the GDP of the country at around 6.9% in 2012. In 2013, it may even go up to 9.4% this is largely on account of increased urbanization and infrastructure investments thereby resulting in more demand for steel. Globally too, the demand is expected to take off in the latter half of 2012. It is expected to grow by 3.6% to 1422 metric tonnes in 2012. Steel consumption id India may reach 72.5 metric tonnes in 2012. Steel companies that are ramping up production capacities may benefit out of this growing demand.

The earnings season continued with companies like Hindustan Unilever, Titan Industries, Idea Cellular, Maruti Suzuki, Titan Industries and many others declaring their results for the quarter ended March 21012.

Automobile major Maruti Suzuki saw some respite in the final quarter of the financial year 2012. It reported sales growth of 17.2% YoY during the quarter. This was largely led by 5% YoY growth in number of cars sold. Realizations were up by 12% YoY. Higher input costs resulted in lower operating profits. Operating profits were down by 15.3% YoY. Margins at the operating level shrank by nearly 3%. Interest costs shot up by 226% thereby resulting in net profit fall of 3% YoY. Net profit margins hovered around 5.5% as compared to 6.6% during the same quarter last year.

Telecom company Bharti Airtel announced results for the fourth quarter and the full year ended March 31, 2012. The company has reported a 14.9% YoY and 20% YoY increase in total revenues for the quarter and full year respectively. This was achieved by growth in the revenues from all segments. Revenues from mobile services (including African operations), increased by 16% YoY. Revenues from the enterprise services and passive infrastructure service segments witnessed a decent growth of 9.7% YoY and 9.9% YoY respectively. Operating profits were up by 13.7% YoY during the quarter and by 17.6% for the full year 2011-12. Operating margins remained at 33% levels. A higher interest outgo (up by 54.9%), resulted in net profits falling by 24.2% YoY during the quarter. For the full year, net profits were down by 27.8% YoY.

Titan Industries declared results for the fourth quarter ended March 31, 2012. Net sales grew by 28.3% YoY. Revenues from time wear sales were up by 25% YoY during the quarter and those from jewellery were up by 30% YoY. Jewellery now accounts for 79% of total sales of Titan Industries. Operating margins were up by 3% during the quarter. Net profits for the quarter were higher by 72.2% YoY and by 39.4% for the full year 2012. Net profit margins too inched higher by around 2.6% during the quarter.

Movers and shakers during the week
Company27-Apr-124-May-12Change52-wk High/Low
Top gainers during the week (BSE-A Group)
MMTC Limited67577014.1%990/448
Godrej Consumer5185628.5%547/375
United Phosphorus1131206.3%169/111
Top losers during the week (BSE-A Group)
IRB Infra169127-24.6%210/125
Koutons Retail98-15.6%34/8
NCC Limited5043-15.0%101/32
Jai Corp Limited7060-14.3%170/48
Alstom Projects412359-13.0%613/287
Source: Equitymaster

We will now discuss the other important corporate/economic events that took place over the week. In a major development in the world of Indian pharmaceuticals, Cipla has slashed the rates of the cancer drugs that it manufactures. Prices have been cut for three cancer drugs meant for the treatment of lung cancer, kidney cancer and brain tumour. Gestinib, Sorafenib and Temozolamide respectively are used to treat these ailments. Cipla has effected huge price cuts in all these drugs. Price of Sorafenib has been slashed from Rs 27,950 to Rs 6,840.

Continuous depreciation of rupee against other currencies despite Reserve Bank of India's intervention is a cause of worry for investors in India. Combine that with the concerns over government's stand on double taxation avoidance treaty with Mauritus. Global cues too seem to be keeping investors on their toes. However, you have not many reasons to worry if you have invested your money into the fundamentally sound companies that have a track record of performing well even in adverse situations.

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May 6, 2012


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