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Mixed Week for Global Indices
Sat, 8 Oct RoundUp

The performance of global markets this week was a mixed bag. Among the key global markets, US stock market witnessed losses (down 0.4%) for the week. The US market went into the correction mode, following a jobs report that came below expectations. Yet the data was viewed to be strong enough, boosting the chances for rate hike in December by the US Federal Reserve.

European stocks were lower as investors remained cautious ahead of US jobs report and plunge in British currency. British Pound crashed to 31 years low in a flash crash, and fell by more than 6% against US dollar on Friday. Markets are increasingly worried over heated discussions surrounding UK's exit from EU. British Prime Minister Theresa May announced to initiate the process of Britain's exit by end of March 2017, marking the start of a two-year exit process.

Back home, after the last week's plunge, owing to surgical attacks in terrorist camps in Pakistan, the markets closed in green up 0.7% for the week gone by. On the back of inflation data and the slowing growth rate, the Reserve Bank of India (RBI) announced cut in the repo rate by 0.25 per cent on Tuesday. However, the Cash Reserve Ratio (CRR) was kept unchanged. The repo rate stands at 6.25 per cent now.

Key World Markets During the Week

On the sectoral indices front, stocks from oil and gas sector witnessed was the leading gainer in the pack. The oil and gas index hit eight year highs and was among the best performer. The worst performer for the week was IT index, down 1.4%.

BSE Indices During the Week

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

India's fast moving consumer goods (FMCG) is currently valued at US$ 49 billion. The market is expected to grow to US$104 billion by 2020. The contributing factors would be a steady economic growth, rising share of organised retail, improving awareness, and a favourable demographic dividend, the reports noted. Further, the share of online sales of FMCG products globally accounted for around 5% in 2015. However, India only accounts for a share of just 0.68% of the global FMCG market. Nevertheless, globally FMCG sector is expected to grow at CAGR of 4.4%, which when compared to India is slower.

The automation threat is getting bigger by the day. A recent research by the World Bank suggests that technology could fundamentally disrupt the pattern of traditional economic path in developing countries. And the threat to India here is not something we can ignore. The study stated that automation threatens 69% of the jobs in India. While India boasts its demographic dividend, the benefit will only come if the government is able to create the right environment for job creation. The penetration of automation is set to grow in the coming future; thereby making the issue of unemployment worse than before. In fact, this trend is already visible. The automation trend is accelerating not just in manufacturing but in services sectors such as IT too. India's IT companies are no longer hiring employees the way they were five years ago. Vivek Kaul, editor of Vivek Kaul's Diary, has some interesting points to make in this regard. In one of his articles, he has written on the fallacy of the demographic dividend and forced us to question this much hyped competitive advantage as compared to other nations. In a slight different vein, one of our editions of The 5 Minute WrapUp explains how market participants can take advantage of the advances in technology and robotics.

Indian companies have raised US$ 2.87 billion through an initial public offering (IPO) in the nine months ended September this year. Reportedly, in the preceding three years the cumulative fundraising through IPOs stood at US$ 2.7 billion. Further, a long list of IPOs is scheduled to hit the markets in the coming months, including the likes of Continental Warehousing, Avenue Supermarts, Genesis Colors, GR Infraprojects, Shankara BuildPro. So the all-important question is-should one invest in them?

Well, we just made choosing the right IPO stock simpler for you.

While our general pessimism towards IPOs is well known, we do think a select few IPOs are fundamentally strong and leave some money on the table for investors. Do check out our special report, The Handbook of IPO investing. Besides providing a checklist to help you identify the right IPOs, it has a special focus on insurance IPOs and how to value them.

Movers and Shakers During the Week
Company30-Sep-167-Oct-16Change52-wk High/Low
Top Gainers During the Week (BSE Group A)
Gitanjali Gems60.583.738.3%85/30
Gujarat Mineral Dev84.1596.714.9%101/52
Vedanta Ltd172.05194.813.2%201/58
Oberoi Realty292.1330.413.1%339/210
J&K Bank77.5587.112.3%93/56
Top Losers During the Week (BSE Group A)
Multi Commodity1349.01298.0-3.8%1420/726
Suzlon Energy14.914.5-2.7%25/13
Muthoot Finance349.9339.9-2.8%405/160
Guj State Petronet155.4151.1-2.7%164/114
Hexaware Technologies188.7184.0-2.5%274/183
Source: Equitymaster

And here are some of the key corporate developments in the week gone by.

Tata Steel has reported 12% rise in sales to 2.62 million tonne (MT) in the second quarter ended September 30, 2016 as compared to 2.33 MT sold in previous corresponding period. During April to September period of the current fiscal, the company's sales increased by 6% to 4.77 MT from 4.48 MT during the same period last year. Furthermore, crude steel production rose by 12% to 2.81 MT in the September quarter from 2.51 MT during the same period in 2015-16. In the first six months, output was up by 10% to 5.34 MT from 4.85 MT in the year-ago period. Saleable steel production was higher by 13% to 2.73 MT in the July-September quarter of 2016-17 from 2.41 MT during the same quarter in 2015-16. In the first six months of this fiscal, saleable steel production rose by 9% to 5.06 MT from 4.64 MT during the same period in 2015-16.

Tata Motors' subsidiary -- Jaguar Land Rover (JLR) has reported its best ever September retail sales of 61,047 vehicles, up 28% compared to September 2015. The month's performance has been driven by strong sales of the Land Rover Discovery, Discovery Sport, the Range Rover Evoque and the Jaguar F-PACE, as well as solid sales in China. Jaguar Land Rover delivered solid retail sales growth across all key regions year on year. Land Rover has strengthened its position as a world-leading manufacturer of all-terrain SUVs.

Indian Oil Corporation (IOC) is planning to invest Rs 180 billion to raise capacity of its Panipat refinery in Haryana to 25 million tonnes (mt) by 2020, larger than previously planned. The company had previously planned to raise capacity of Panipat refinery from 15 mt to 20.2 mt, but now it is looking at raising the capacity straightway to 25 mt. The nation's largest oil firm owns and operates 11 out of India's 23 refineries with a combined refining capacity of 80.7 mt per annum.

BPCL is also reportedly planning to build a terminal on the west coast to import liquefied petroleum gas (LPG). The said terminal will have a capacity of 2 million tonnes per annum (mtpa), and will cost Rs 10 billion. In another development, Oil and Natural Gas Corporation's (ONGC) wholly owned subsidiary- ONGC Videsh Limited has received approval from the Cabinet Committee on Economic Affairs to acquire 11% stake in Russia's Vankor oil fields from Rosneft Oil Company for US$930 million, which will take its overall stake in the project to 26%. OVL had bought a 15% stake in the field for US$1.268 billion last year. The acquisition will provide 3.2 million tonne of oil equivalent to OVL by 2017.

As per an article in Livemint, Dabur India Ltd will introduce the make-up and beauty brand, Jaquline USA to India. Reportedly, Dabur will market Jaquline USA through NewU, a retail chain owned by its subsidiary H&B Stores. The NewU stores are lifestyle retail stores under the company name of H&B Stores Ltd, which is a 100% subsidiary of Dabur India Ltd. It operates about 70 stores across the country. Further, the launch also marks the India entry of Jaquline USA, a brand owned by Fem Care Pharma in the US. The new brand Jaquline USA will feature a range of make-up & beauty products.

Notably, the overall beauty and personal care market in India is estimated at Rs 747 billion by retail sales value. Whether, Dabur's foray further boosts its presence in the beauty care market will be the key thing to watch out for going ahead.

Securities and Exchange Board of India (SEBI) has found enough reasons against Yes Bank and its investment bankers to start an adjudication process in relation to its US$ 1-billion-dollar fund raising effort last month. SEBI stated that Yes Bank's fund raising through the Qualified Institutional Placement (QIP) route fell short of the disclosure requirements as prescribed beneath the Listing Obligation and Disclosure Rules. (LODR) Further, experts believe that the failure on the banks part to disclose required information to the market participants also amounts to misrepresentation of the facts. Similarly, the regulator will likely pull up the lead merchant bankers to the issue for not doing enough due diligence and not providing adequate advice. Goldman Sachs (India) Securities Pvt. Ltd, CLSA India Pvt. Ltd and Motilal Oswal Investment Advisors Pvt. Ltd were the three main book running lead managers (BRLMs) to the QIP. However, it is imperative to note that these are just initial findings and the regulator will appoint an adjudicating officer who would review these findings and hold an inquiry. Market participants have lost around Rs 53 billion since the day they came to know about the irregularities in the QIP offering.

The macro and domestic factors will continue to infuse volatility in the markets. We recommend investors should not get swayed away by short-term trends. Instead they should pick up fundamentally strong businesses when they are selling at attractive valuations.

And here's an update from our friends at Daily Profit Hunter...

Bulls threw up a surprise punch earlier in the week by bouncing back more than 100 points on Monday. Markets were in a cheerful mood for the first two days of the week, but bears caught up soon and pulled the index back from the weekly high of 8,807. The index finally ended the week with gains of about a percent at 8,695. Markets are likely to trade in a range on a lackluster note on an immediate basis due to a short trading week. You can read the detailed market update here...

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