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Mixed week for global indices
Sat, 8 Aug RoundUp

The performance of global markets this week was a mixed bag. Among the key global markets, US stock market witnessed losses (down 1.8%), as jobs report matched economists' estimates and suggested that US gained over two lac jobs in July. This boosts the chances of a rate hike in September by US FED.

The European stock markets recovered a little from the last week. The stock markets in Germany and France were trading higher by 1.6% and 1.4% respectively. However, major European stock markets witnessed losses towards the end of the current week on the back of lackluster German Industrial output reports. Further even US jobs data and disappointing earnings report had negative impact on the markets.  

Among the major Asian stock markets, stock market in China posted gains (up 2.2%) over the week as the Government put in efforts to arrest the slide in stock prices. The stock market in Japan gained 0.7% over the week. The gains were mainly on account of Bank of Japan keeping its stimulus programme unchanged.

Back home, the Indian stock markets posted marginal gains (up 0.4%) over the week. After a healthy rally in past couple of days, the markets ended the week on a lackluster note amid weak global cues and stalemate in Parliament.

Key world markets during the week
Source: Yahoo Finance

The major sectoral indices witnessed gains over the week with stocks in the realty and auto sector leading the gainers.  Smallcap and midcap stocks continued to remain in demand during the week gone by.

BSE indices during the week
Source: BSE

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

The Reserve Bank of India has left the rates unchanged. However, it has suggested better growth prospects ahead. While RBI will closely monitor inflation data, markets are expecting low inflation and rate cuts in future.

Coal India has prepared a roadmap for achieving a coal production level of about 908 MT (million tonnes) in 2019-20 as against the current production level of 494.23 MT. For the purpose, the company is going to invest Rs 625.9 bn in five years by 2019-20. As reported, the planned investment would be met from internal resources of the company. The company accounts for over 80% of the domestic coal production.

National Thermal Power Company (NTPC) is exploring options to manufacture solar equipment as part of the state owned power producer strategy. It is planning to set up a 1000 MW per annum manufacturing capacity which may require an investment of Rs 50bn. The company has also given its commitment to reduce the dependence on fossil fuel to 56% by 2032. The government has pushed renewable energy to the top of its energy security agenda and is looking to provide green power at Rs 4.5 crore per Mw. For achieving the target of 100GW renewable energy by 2022, India would need an investment of approximately US $ 200bn.

Movers and shakers during the week
Company31-Jul-157-Aug-15Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Jai Prakash Power 6 8 28.1% 18/5
Jai Prakash Associates   10   12 23.5% 60/9
Cummins India 997            1,184 18.8% 1247/644
Torrent Power Ltd 146 172 17.9% 187/121
Union Bank 177 206 16.6% 254/130
Top losers during the week (BSE-A Group)
JSW Energy   84   77 -8.7% 126/64
HCL Tech 997 939 -5.8% 1058/725
Coal India Ltd 439 416 -5.4% 447/332
Muthoot Finance 198 187 -5.3% 254/166
Coromandel Intern. 243 231 -5.0% 340/225
Source: Equitymaster

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

As per an article in business standard, Maruti Suzuki has launched a diesel powered S-Cross priced between Rs 8.34-13.74 lakh (ex-showroom Delhi). The car will be retailed only through Nexa outlets. Nexa is a recently launched premium dealership. In order to appeal to the premium customer the company has dropped the Maruti Suzuki batch and the car will only sport the 'S' logo. S-Cross is a crossover but will compete with SUVs such as Renault Duster, Nissan Terrano and Hyundais Creta. Maruti has got confirmed bookings of 6000 vehicles for the S-Cross so far.

As per an article in financial daily, Tata Steel has discontinued the talks with Switzerland based Klesh Group for sale of its Tata Steel UK subsidiary 'Long Products Europe'. The subsidiary manufactures plates, sections, wire rod and semi-finished steel for different markets, including construction, ship-building & engineering, energy and wire drawers. These products are made at its mills in Teesside and Scunthrope in the UK. Klesh group is an industrial commodities business with three divisions specializing in the production and trading of chemicals, metals and oils.

According to a leading financial daily, FMCG major Britannia Industries will set up two greenfield plants, one near Erode in Tamil Nadu and the other in Bengaluru, Karnataka, at an estimated investment of Rs 2.5 bn. The new units are likely to be ready by December and will have a total capacity of 100,000 tonnes per annum. This is part of the Rs 5 bn capex that the company has planned during the fiscal. Reportedly the company is looking at a 10% volume growth annually and it needs to add at least 80,000 tonnes (or a 10% addition) to their total capacity each year for the next few years. The company, currently, has a total capacity of 800,000 tonnes per annum across 14 of its own plants and 28-30 contract manufacturing facilities in the country. Apart from the two proposed units, it is also expanding production capacity at its Gujarat unit.Now that the result season is in full swing, let us take a look at the interim performance of some of the companies.

Non-banking finance company Capital First has declared its numbers for the quarter ended June 2015. The company has posted 59% rise in its profit after tax on a YoY basis. This was helped by steady growth in assets under management (AUM) and control on operating costs. The retail loan assets grew by 24% YoY. As stated, the growth in income was primarily driven by higher net interest income which grew 39% YoY.

According to financial times, country's largest two wheeler player Hero Motocorp has reported its numbers for the first quarter ended June 30, 2015. The company has reported a 33% surge in its net profit on a YoY basis. Net sales for the company declined 2% YoY. The operating profit during the period rose 44% YoY while the EBIDTA margin rose to 15% YoY. The company for the month of July has sold 4,87,580 units, an 8% decline as compared with last year

Bharti Airtel reported its quarterly results for the first quarter of FY 16. The company reported a 40.2% jump in the net profit for the quarter ending June at Rs 15.5bn. The sharp surge in the bottom line was boosted with several exceptional items like sale of tower business. Mobile data revenues now account for 14.6% percent of the total revenues compared to 9.6% in the corresponding quarter last year. During the year the mobile data revenues grew 57% y-o-y to Rs 34.59bn as data traffic rose by 86.5% The company managed to expand operating margins by 160 basis points to 38.8% during the quarter. The average revenue per user in Africa declined 10% on a y-o-y basis.

Indian stock markets have performed well as compared to other emerging market peers. While the market seem to be in sweet spot , going forward, global events such as volatility in the commodity markets and Fed decision on rate hike could impact markets adversely. However for investors it makes more sense to look for stocks with strong fundamentals for the long term and not to get swayed away by short term blips in the stock market.

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