Global stock markets remain buoyant

Sat, 16 May RoundUp

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Majority of the global markets, barring Europe, ended on a positive note in the week gone by. The US markets were up by 0.4% despite dismal industrial data. The US industrial production witnessed a fall for the fifth month in a row in April on account of a continued decline in oil and gas drilling. This along with weak consumer sentiments pushed down the dollar and the euro appreciated as a result. Consequently, European markets particularly the export-dependent German stocks were beaten down. Even the stock markets in UK and France were down by more than 1% each for the week.

All the Asian markets remained firm in the week gone by. The Chinese market was the biggest gainer after China's central bank lowered the benchmark rate by 25 basis points to 5.1% to boost growth. The Indian market logged a gain for the second straight week on the back of recovery in the rupee against the dollar and positive sentiments arising as result of inflation and fiscal deficit being under control. With the country's industrial production growth slowing down to a five-month low, cooling inflation has led to expectations of rate cut by the Reserve Bank of India.

Key world markets during the week

Source: Yahoo Finance

Majority of the sectoral indices have ended the week in the green. Sectorwise, auto and banking stocks led the gains while stocks in the metal and realty sectors were the sole losers. The mid cap and small cap indices gained 3.2% and 2% respectively for the week.

BSE indices during the week

Source: BSE

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

India's wholesale price inflation (WPI) contracted for the sixth month in a row in April to a new low of -2.65% mainly on account of fall in the prices of fuel and manufactured items even as food prices increased. The WPI has been in the negative territory since November 2014 and hovered at 5.55% in April 2014. The industrial production has slowed down to a five-month low of 2.1% in March. Therefore continued deflationary trend coupled with fall in industrial output have made the case stronger for a rate cut by the Reserve bank of India.

The Union Cabinet has approved the proposal to divest 5% stake in NTPC and 10% stake in Indian Oil Corporation. The proposed share sale of 5% in NTPC would fetch the government Rs 55.6 bn, while that of 10% in IOC would amount to Rs 79.3 bn. Thus, the stake sale in both companies would help the government mop up over Rs 130 bn at current market price. The government holds 74.96% in NTPC and 68.57% in IOC.

Movers and shakers during the week

Company	8-May-15	15-May-15	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Union Bank	134	165	23.0%	260/130
Jubilant Foodworks	1,431	1,748	22.2%	1774/1102
Eicher Motor	15,789	18,707	18.5%	18789/6250
Shree Cement	10,156	11,874	16.9%	12389/5992
Emami Ltd	906	1,030	13.6%	1140/429
Top losers during the week (BSE-A Group)
Housing Dev. Infra	120	108	-10.1%	143/59
Future Retail	124	114	-7.4%	152/81
Core Education	8	7	-6.9%	22/6
DLF Ltd	133	125	-6.1%	243/100
Hindustan Unilever	895	845	-5.5%	979/555

Source: Equitymaster
Now let us move on to some of the key sectoral and corporate developments of the week gone by.

Tata Steel continues to be adversely impacted by a number of its overseas business ventures. The company has announced Rs 65 bn goodwill impairment charge for the loss of value of operations in Europe, Canada and Mozambique in 2014-15. Of the total impairment charge, around Rs 50 bn relates to the non-cash write down for long products UK business in Europe. The impairment also includes write down of investments in overseas raw materials projects in Mozambique, Ivory Coast and Tanconite project in Canada.

The state run Power Grid will invest over Rs 10 bn in the next few years in two projects. The company will invest Rs 3.12 bn in transmission system for Ultra Mega Solar Park in Anantpur District in Andhra Pradesh. Reportedly, the company's board has also approved an investment of Rs 7.8 bn for creation of 400/220kV substations in Delhi during the 12th plan period.

Ashok Leyland has chalked out investments to the tune of Rs 3 bn in FY16. The company would be investing Rs 1-1.5 bn as capital expenditure and a similar amount would be invested in joint ventures. Reportedly, the company is also planning to set up bus assembly plants in Africa, West Asia and one in India. The project would attract an investment of Rs 200 m each.

Another company Bajaj Auto wants to expand capacity of its Chakan (Maharashtra) facility. The company wants to increase total market share in the two-wheeler segment to 23% from current 17%. The overall production capacity in its all three plants is 325,000 units per month, out of which the company sold 146,000 per month on an average for the year 2014-15. The company has launched 5 new models this year and would be launching at least one more product

State-run Steel Authority of India Ltd has completed the current phase of the modernization and expansion of the Bokaro Steel Plant with an investment of Rs 63.25 bn. As a result, the plant's crude steel production capacity has increased to 4.61 million tonnes per annum (MTPA) from 4.36 MTPA. SAIL has charted investment of Rs 1,500 bn till 2025 to ramp up its steel production from 24 million tonnes to 50 million tonnes.

Let us take a look at the quarterly results of some of the companies.

Hindustan Unilever witnessed a slight improvement in its offtake for the March 2015 quarter. The company registered an 8% YoY revenue growth during the quarter on a 6% YoY underlying volume growth in the domestic consumer business. However net margin, net of exceptional income including profit on sale of properties and wholly owned subsidiary Brook Bond Estates, has contracted by 0.4% YoY to 11% due to higher tax outgo and lower other income earned. For FY15, the company's topline grew by 10% on 5% volume growth whereas net profit was up by 11.6% backed by higher extraordinary income earned during the quarter.

Lupin Ltd has reported a 1% YoY decline in net profit at Rs 5.47 bn for the quarter ended March 2015. The decline was due to fall in revenue from its US business which accounts for 45% of total sales. The revenues of the company remained flat at Rs 30.5 bn YoY. Demand for its products declined in three key markets- the US, Japan and the rest of the world by 6%, 9% and 3% respectively.

Ashok Leyland has reported a 46% growth in revenue at Rs 45 bn in the March 2015 quarter. The growth was driven by a strong 33% YoY growth in volume and 10% improvement in realizations. For the year FY15, company's M&HCV (medium and heavy commercial vehicles) volumes grew 28% as compared to industry growth of 16%, helping Leyland gain market share.

Union Bank of India, has reported a dismal performance for the quarter ended March 2015. The company's net profit declined by 23.4% YoY to Rs 4.4 bn because of higher taxation. The operating profit grew to Rs 16.5 bn for the quarter as against Rs 13.2 bn for the quarter of last fiscal. The net interest income for the quarter grew marginally by 3.5% YoY and the total deposits grew by 6.5%. The company has recommended a dividend of Rs 6 per share (60%) for 2014-15.