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Global markets end on a mixed note
Sat, 20 Sep RoundUp

The global markets ended on a mixed note for the week gone by. The initial concerns over the likely rate hike in the US weighed heavy on the global markets. However, Fed chairman Janet Yellen kept the interest rates unchanged, leading to a rally in the stock markets globally. The other development that led to global markets breathing a sigh of relief was voters decisively rejecting independence for Scotland. The anti-independence 'No' camp garnered 55% of the votes and led to Scotland's first Minister Mr Alex Salmond resigning. Among the global markets, Japanese and US stocks were the leading gainers for the week. On the other hand majority of Asian markets witnessed selling pressure.

Indian indices had a volatile week with the BSE-Sensex up by just 0.1%. On the positive side, Chinese president Xi Jingping visit to India has led to the former promising investments of around US$ 20 bn in the next 5 years in India. On the other hand, the ongoing by-elections, which have not been in BJP's favour so far, had some negative impact on the Indian stock markets.

Key world markets during the week
Source: Yahoo Finance

Among the sector indices, IT (up 2.2%), Pharma (up 1.4%) and FMCG (up 1.2%) indices led the pack of gainers. Oil & gas (down 3.1%) and Metal (down 0.6%) were among the major losers for the week.

BSE indices during the week
Source: BSE

Now let us discuss some of the economic developments of the week gone by.

Wholesale Price Index (WPI) for the month of August has been released. It declined to 3.74% YoY during the month versus 5.19% YoY in July, which is the lowest in the past 5 years. The primary articles inflation declined to 3.89% in August, while the manufacturing goods inflation came down to 3.45%. Highest fall in inflation was witnessed in the prices of food and power & fuel which fell to 5.15% and 4.54% in August from 8.43% and 7.4% respectively in July. However, Consumer Price Index (CPI) which is been majorly followed by RBI for its monetary policies, fell marginally to 7.8% YoY in August compared to 8% YoY in July. Due to CPI remaining almost flat, it is likely that RBI's tough stand on inflation might continue in the upcoming credit policy

Movers and shakers during the week
Company12-Sep-1419-Sep-14Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Zee Entertainment28431210.1%316/220
Castrol India4014399.6%452/382
Hexaware Technologies1791790.0%198/112
Gujarat Flurochem6256808.8%684/217
Top losers during the week (BSE-A Group)
Suzlon Energy2320-11.9%37/6
Jindal Steel236211-10.7%350/205
Jaypee Infratech2926-9.8%42/16
GMR Infra2523-9.1%38/19
Torrent Power165152-8.1%173/70
Source: Equitymaster

Now let us move on to some corporate developments in India Inc.

As per a leading financial daily,Marico is reorganizing its business with an aim to double its turnover in four years. The company had integrated its domestic and international businesses last year to consolidate operations. In the second phase, the company would achieve synergies between the two businesses in terms of cross-pollination of brands and offerings, talent mobility and transfer of best practices, processes and systems for standardization across markets. The reorganization will focus on three key areas namely skin, hair nourishment and male grooming. The company will also create regional hubs to grow business and derive synergies of scale across manufacturing units. Marico has also been aggressive in increasing its direct distribution in India for a wider reach of its products in outlets. The company's direct reach currently stands at nine lakh outlets which would be increased over time. Apart from kirana stores, the

As per a leading business daily, Maruti Suzuki has announced that voting by minority shareholders with regards to its move to let its parent company Suzuki Motor Corp own and operate the Gujarat plant is likely to happen in November. This is as opposed to it happening in the month of October as planned for earlier. The company's management has expressed that because it is a long procedure, the company has not yet been able to put all the things in place. And thus the delay by a month.

According to one of the leading financial daily, the national pharmaceutical pricing authority (NPPA) has capped the prices of 19 medicines and their 43 different drug packs, including anti-infectives, gastro-intestinal drugs and vaccines. This move is expected to impact various Indian and MNC pharma companies like; Ranbaxy, Cipla, Cadila, Lupin. And among the MNC pharma companies Pfizer, and Sanofi. The latest tranche of price control includes key medicines such as ciprofloxacin, cefotaxime, BCG vaccine and rifampicin. Recently, the NPPA had brought all diabetes and cardiac medicines under indirect price control . The regulator is likely to extend the move to other categories, such as oncology, soon.

Bangalore-based biotechnology firm Biocon has stated that Silver Leaf Oak (Mauritius), an investment vehicle advised by India Value Fund Advisors, has agreed to acquire a minority stake of 10% in its research services arm, Syngene International Ltd, for Rs 3,800 million. It must be noted that the stake purchase comes a week after GE Capital exited from its 7.69% stake in Syngene, which was bought by Biocon Research (BRL), another subsidiary of Biocon, for Rs 2,153.8 million. Now, Biocon and BRL will jointly hold 85.54% stake in Syngene, while Silver Leaf Oak will hold 10%. The balance 4.46% shareholding is held by some entities such as trusts and employees stock options. It is worth noting that Biocon has been looking to list Syngene International on the Indian bourses. However, the timeline for an IPO has not been indicated so far. The research services arm reported revenue of Rs 7,150 million in FY14, reporting a growth of 28%.

The stake purchase by Silver Leaf Oak gives Syngene a higher valuation at Rs 3,800 crore compared to around R2,800 crore at the time of GE Capital's exit on September 9.

In order to ensure interrupted fuel supply to power plants, the government has directed Coal India to cut the quantity of coal it sells via auctions. It may be noted that Coal India sells coal in the open market as well as via auctions. The auction route is beneficial since it fetches higher realizations. However, this raises the cost of power and reduces the quantity of sales that happen in open market. As a result, the government has asked Coal India to cut the quantity of coal sold through the auction route. It is believed that loss of revenues due to lower quantum of sales via the auction route may prompt the company to raise the prices. If prices indeed increase it may attract investor interest into the stock.

In a filing with the BSE, Gurgaon-based drug maker Ranbaxy Laboratories has stated that it has received a Civil Investigation Demand (CID) from the US Department of Justice. The department has sought information relating to the manner in which the company reports pricing data for certain products eligible for reimbursement under the Medicaid program. The company has clarified that the CID is a request for documents and information. It is not an allegation of wrongdoing or demand for compensation. It must be noted that Ranbaxy has been penalized by US authorities in the past.

India's third largest software firm, Wipro, has won a software contract from the Saudi Electricity Company (SEC) of Saudi Arabia, the largest power utility in the Middle East. The contract was won by Wipro Arabia the Middle East arm of the firm. The contract relates to the implementation and roll out of the SAP based ERP system for the plant maintenance and project system functionality. Wipro is expected to complete the project in 10 months. The financial details of the contract were not disclosed.

On the macro front geopolitical events will continue to influence the stock market direction. Other than this, the ongoing by-elections too will have positive or negative impact on the stock markets. While the long term fundamentals of the country remains intact, the small term hiccups are expected to negatively impact the stock prices. Hence investors should not get swayed by short term jitters and focus on investing in fundamentally strong stocks.

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