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Indian indices underperform the most
Sat, 13 Jun RoundUp

Barring stock markets in China and Brazil, majority of global indices remained under pressure for the week gone by. Uncertainty over the timing of rate hikes by the US Fed and Greek's debt saga continued to weigh on the markets. All eyes are now on the US Fed meet which is scheduled next week.

Major European markets remained under pressure. Greece's bailout agreement with its creditors is set to expire soon this month. Greece has already delayed one payment and is now into negotiation for a new deal to avoid defaulting on its massive debts. On the other hand, few equity markets in Asia notched some mild gains. China was the leading gainer (up 2.8%) for the week.

Back home, Indian indices continue to remain under pressure for the third consecutive week. The BSE Sensex was the top loser in the pack. Persistent selling activity was witnessed across the indices. Worries over economic recovery and deficient monsoon forecast have been the prime factors.

Key world markets during the week
Source: Yahoo Finance

Majority of the stocks were at the receiving end and hence most of the sectors witnessed selling pressure led by realty and consumer durables stocks 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.

Reserve Bank of India (RBI) has decided to permit non-resident Indians (NRIs) to subscribe to chit funds without limit on non-repatriation basis. This subscription should come through the normal banking channel, including through an account maintained with a bank in India.

The Reserve Bank has recently proposed that Indian corporates eligible for raising external commercial borrowings (ECBs) could also raise funds overseas by issuing Rupee linked bonds. The move is likely to open another window for cheaper resources. The corporates that are currently allowed to access ECB under the approval route will require prior permission of the RBI to issue such bonds. The corporates that come under the automatic route, however, can do so without prior permission of the RBI. The bonds may be floated in any jurisdiction that is Financial Action Task Force (FATF) compliant. The subscription, coupon payments and redemption may be settled in foreign currency. End use restrictions will be as applicable under the extant ECB guidelines. For US dollar to Indian rupee conversion, RBI's reference rate on date of issue will be applicable. The RBI has invited comments on the draft guidelines by June 15, 2015. On a separate note, the RBI has also extended the scheme allowing airline companies raise external commercial borrowings (ECB) for working capital as a permissible end-use under the approval route. This is going to continue till March 31, 2016

Movers and shakers during the week
Company5-Jun-1512-Jun-15Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Essar Oil10014039.9%133/92
Astrazeneca Pharma9201,10019.5%1245/785
Bhushan steel505815.6%444/49
Dish TV991067.2%106/52
Top losers during the week (BSE-A Group)
Sun TV360287-20.3%476/258
Adani Enterprise11794-19.7%804/97
Jaiprakash Associates1311-15.4%84/11
Jet Airways315264-16.2%544/204
Source: Equitymaster

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

India's largest automobile company Tata Motors and partner Fiat have begun strategic talks before the launch of sports utility vehicles, hatchbacks and compact sedans developed by Tata Motors and Fiat, independent of each other at their jointly owned manufacturing unit in Pune. These cars are expected to be introduced in the market by the respective companies within a period of one year. The partners are discussing product and investment plans which will be finalised for the jointly owned manufacturing plant located at Ranjangaon, Pune. Discussions are also on for sharing of engines and transmissions which will be an extension of its ongoing agreement. Products such as Fiat Linea, Avventura and Punto and Tata Motors' Vista and Manza are manufactured in the jointly-owned manufacturing plant. The stock of Tata Motors is currently trading down by 1.71%.

According to a leading financial daily, Hindustan Unilever (HUL) has reportedly stopped sales and production of its Chinese range of instant noodles. The company has sought clearance from FSSAI and will resume sales of the products after getting approval. Reportedly, HUL conducted additional testing of its noodles range of products from external FSSAI approved laboratory last week to reassure consumers. The tests show that the Chinese noodles range of products are safe for consumption and continue to meet all regulatory norms. Further, HUL had submitted an application with FSSAI for product approval for the Knorr Chinese range of instant noodles in February 2015 and the same is pending approval.

As per a financial daily, ONGC is planning to invest Rs 417 bn for bringing to production newer oil and gas fields and redeveloping ageing fields as it looks to boost output. Of the total, the company will invest Rs 241 bn in development of six projects both on the east and west coast. Another Rs 175 bn will be spent on redeveloping its prime Mumbai High fields as well as Heera-South Heera fields in western offshore. The company, which produced 25.94 million tonnes of crude oil and 23.52 bn cubic meters of gas in 2014-15, is boosting investment to reverse the declining trend in output at bulk of its old and ageing fields.

Housing Development Finance Corporation (HDFC), the largest mortgage lender in the country, has said that it will raise as much as Rs 50 bn by selling bonds during the fiscal year. Proceeds from these funds will be utilized to raise its holdings in HDFC Bank which fell last year due to a share sale by the bank. Also part of the funds will also be utilized to lend to customers to buy homes. For this, the lenders are going to seek its shareholders approval at the annual general meeting (AGM) which is scheduled for 28 July 2015.

According to a financial daily, Novartis AG, parent company of Novartis Ltd, is considering delisting of Indian unit, Novartis India from the BSE. As per the reports, Novartis AG is planning to purchase all the remaining shares of Novartis India that it does not own. These have a market value of about $419 m. However Novartis India in its clarification said that it has not received any notice of the same.

On the back of the recent spate of correction in market, several stocks have seen their prices fall. On the domestic front, factors such as weak monsoon can stoke inflationary pressures. Further, the geo-political tensions are expected to fuel uncertainty across the world including the Indian markets. For investors though, it makes more sense to look for stocks with strong fundamentals and not get swayed away by these near term uncertainties.

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