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Global markets closed the week on a positive note with a majority of the indices ending in the green. Asian indices rallied on growing expectations that the US Fed will not hike interest rates until next year due to concerns of global economic slowdown. The Chinese market was the biggest gainer fuelled by speculation that the dragon nation would introduce more measures to stimulate the economy. Barring Japan, all the Asian markets posted gains during the week.
The US markets ended with marginal gains as upbeat prices and jobless claims data eased some concerns about the economy. The eurozone slipped back into negative inflation putting pressure on the European Central Bank to extend its quantitative easing program. Among European markets, only Germany ended with gains during the week. Back home, the Indian markets ended higher. The BSE Sensex was up 0.5% for the week.
Key world markets during the week
BSE indices during the week
Now let us discuss some of the key economic and industry developments in the week gone by.
The Index of Industrial Production (IIP) rose to 6.4% for the month of August compared to 4.1% in the previous month. The robust growth in the index was backed by a pick-up in the consumable durables output ahead of the festive season. Electricity generation, mining, and manufacturing output grew by 5.6%, 3.8% and 6.9% respectively during the month.
However, India's merchandise exports contracted for the tenth month in a row in September. The exports contracted by 24.3% on a YoY basis mainly on account of decline in shipment of petroleum products. The exports of drugs and pharmaceuticals grew by 9.1%. All the other items witnessed a contraction. Exports of engineering goods and, gems and jewellery fell by 22.8% and 18.8% respectively. India is aiming to increase export of goods and services from the current US$ 300 billion to US$ 900 billion by 2020. India also wants to increase its share in the world exports from 2% to 3.5%.
Movers and shakers during the week
|Top gainers during the week (BSE-A Group)|
|Top losers during the week (BSE-A Group)|
Now let us move on to some of the key corporate developments of the week gone by.
Bharat Heavy Electricals Limited (BHEL) has commissioned 2,730 mega watts (MW) of utility power projects in the first six months of FY16. This is more than double the 1,167 MW power project commissioned in the corresponding period last year. The 660-MW Lalitpur unit was synchronized three months ahead of schedule and is the first supercritical set to be commissioned in Uttar Pradesh. The hydro sets commissioned by BHEL in the first two quarters total 730 MW, which is nearly the same as the total hydro capacity added in the country during 2014-15. In addition, 125 MW of overseas projects and 330 MW of captive power plants were also commenced by the company during this period. Though BHEL has a strong orderbook, its topline has been adversely impacted due to various issues ( clearance, land etc). The management has mentioned that it sees traction coming in from the third quarter of FY16.
Dr. Reddy's Laboratories Ltd has reached a settlement with Swiss pharmaceutical firm Helsinn Healthcare SA with respect to patent litigations relating to its anti-nausea injection Aloxi. The settlement will enable Dr. Reddy's to market the generic version of Aloxi in the US on 30 September 2018 or earlier under certain circumstances. Aloxi ( palonosetron HCl) injections are used to treat chemotherapy-induced nausea and vomiting in patients suffering from cancer. Reportedly, Aloxi had sales of nearly US$416 million in the US and Canada for the year ended 31 March.
The US subsidiary of Sun Pharmaceutical Industries, Taro Pharmaceuticals has acquired Canada- based Zalicus Pharmaceuticals for a cash payment of about Rs 250 million. The company is engaged in the development of a pain management drug candidate coded Z944. The acquisition will strengthen Taro's focus on proprietary drugs and expand beyond its forte in dermatology drugs.
ABB India has won orders worth Rs 1.41 billion from Power Grid Corporation of India to supply 765 kilovolt (kV) ultrahigh voltage power transformers for substations in the northern states of Uttarakhand and Uttar Pradesh. Three of these ultra-high voltage transformers will be installed at the Meerut substation in the north west of Uttar Pradesh, while 14 transformers will be installed in new substations being constructed in Uttarakhand. The 14 transformers for the greenfield substations in Uttarakhand are rated at 266.7 megavolt ampere (MVA), while the three transformers for the Meerut substation in Uttar Pradesh are 500 MVA. ABB will design, manufacture, test, transport, erect, and commission the 765 kV single-phase autotransformers at the substation sites.
Mahindra &Mahindra (M &M) launched a new bike named 'Mojo' with a 300 CC engine, 21-litre fuel tank, twin exhausts, and advanced fuel ignition. The bike is priced at Rs 1.6 lakh (ex-showroom Delhi). 'Mojo' will compete with the bikes of rival companies, such as Bajaj's KTM, Yamaha's R-15 and some future TVS products. The bike has been developed in-house with inputs from global partners. The bike has also been designed to be at par with the global products in this class.
Now let us move on to quarterly performance reported by companies.
Tata Consultancy Services has announced its financial results for the September 2015 quarter. On a consolidated basis, the company has reported a 5.8% quarter-on-quarter (QoQ) increase in its sales and a 6.5% QoQ increase in its net profit during the quarter. The company is reportedly in talks with nine of the 11 payments bank license holders to offer operational solutions. State Bank of India, the largest public sector bank, has its core banking operations on TCS' banking platform, BaNCS.
Infosys Ltd posted a strong set of financials for the September 2015 quarter. In rupee terms, the consolidated sales increased by 8.9% QoQ during the quarter. The company has been able to improve deal wins with a better margin profile. Therefore, operating margin improved by 1.5% QoQ, of which only 0.7% was due to favourable currency movements. At the net level, the bottomline was up 12.1% QoQ led by strong operating performance.
Zee Entertainment Enterprises Ltd has posted its results for the quarter ended September 30, 2015. The company witnessed an 8.5% rise in its net profit on a YoY basis. Revenues for the company grew 24% YoY to Rs 11.18 billion. The advertising revenue for the quarter was Rs 8.43 billion, recording a growth of 35% YoY. Subscription revenue showed 13% growth at Rs 4.79 billion.
Hindustan Unilever Ltd (HUL), India's largest FMCG company posted a dull performance for the quarter ending September 2015. The company's revenues grew by 4.7% YoY led by a 7% increase in sales volume. The growth was muted as the company had cut price in its soaps and detergents category and also witnessed weak demand from the rural market. The operating profit margins expanded by 0.4% on the back of lower input costs. The cost of goods sold during the quarter fell by 3.2%. However, the benefits from lower input costs were partially offset by advertisement and promotion expenses that increased by 23.7% YoY. Net profit fell by 2.6% to Rs 9.6 billion during the quarter.
Going forward, concerns over a rate hike in the US and the subsequent outflows of foreign money will keep emerging markets on the edge. Back home, the ongoing earnings season will set the tone for the markets. Moreover, the reform process and the pace of recovery in the economy will be key factors determining the future course of markets. Keeping aside these short term fluctuations, investors should not lose track of company fundamentals while making investment decisions.
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