A lackluster week for global markets

Fri, 26 Oct RoundUp

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It was a lackluster week for the global stock markets as economic growth concerns weighed heavy on investor sentiments. Although major Asian stock markets did not fare much better, the losses were relatively lower than that in the US and European markets. China led the losers in Asia with 2.9% fall over the week. The sustained Eurozone debt fears and disappointing earnings reports worried investors. As for the US, the markets were down by 1.8%, largely due to concerns regarding corporate earnings

In the European markets, Germany (down 2.9%) and France (down 3.2%) led the pack of losers.

Source: Yahoo Finance Note: Prices as on 25 Oct/26 Oct, 2012

Coming to the performance of sectoral indices, barring capital goods (up 1.4%) and banking (up 1.0%) sectors, all other sectors witnessed losses over the week, with realty (down 3.7%) and metal (down 3.9%) leading the pack of losers.

Source: BSE

Earnings season for quarter ended September 2012 continued this week with companies like Gas Authority of India Ltd (GAIL), National Aluminium Company (Nalco) and Mahindra & Mahindra Ltd (M&M) declaring their results for the quarter ended September 30, 2012.

In the energy sector, Gas Authority of India Ltd (GAIL) has announced its results for the second quarter of financial year 2013 (2QFY13). The net sales during the quarter were up by 17% on a year on year (YoY) basis. During the quarter, Petroleum and Natural Gas Regulatory Board (PNGRB) has derecognized revenue worth Rs 1.2 bn. The operating profits for the quarter declined by 15.7% YoY. The subsidy payout in the quarter stood at Rs 7.8 bn, up 39% YoY. The net profits of the company witnessed a decline of 10% YoY. The other income for the quarter grew over 100% YoY .As per the management, the company is likely to commission Dabhol LNG terminal by January 2013. It is still evaluating a share purchase in Reliance Gas Transportation.

In the mining sector, National Aluminium Company (Nalco) has announced its results for the quarter ended September 2012. The net sales and the bottomline of the company have declined by 0.3% YoY and 96.6% YoY respectively during the quarter. Topline of the company remained flat due to lower aluminium London Metal exchange (LME) prices. The company has incurred a loss at the operating level during the quarter owing to higher expenditure. EBITDA margins declined by 9.6% YoY. Net profit margins declined by 8.3% YoY. For the half year ended September 2012, the company has reported a decline of 0.6% YoY in net sales and 55.9% YoY in net profits respectively.

In the auto space, Mahindra &Mahindra Ltd (M&M) Ltd has announced its results for the second quarter of financial year 2013 (2QFY13). The net sales for the quarter have witnessed a growth of 33% on a year on year basis (YoY). The revenue from the automotive sales jumped 58 % in the quarter. The domestic tractor sales were down by 13.8% YoY due to slowdown in the economic growth and poor monsoons. However, this was offset by an increase in the car sales. The operating margin for the quarter stood at 11.4%, down from 12% in 2QFY12. M&M's margins were hit during the quarter due to decline in the tractor sales. The company reported a 22% year on year growth in the net profits .The growth in net profits was boosted by an increase in other income and higher dividends from subsidiary companies like Mahindra Finance and Mahindra Holding.

Movers and shakers during the week

Company	18-Oct-12	26-Oct-12	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Indiabulls Financial Services	228	257	12.9%	251/117
Yes Bank	389	413	6.2%	405/231
Oriental Bank	293	309	5.5%	316/190
Mahindra & Mahindra	837	881	5.3%	872/622
Piramal Enterprises	470	495	5.2%	539/340
Top losers during the week (BSE-A Group)
IRB infrastructure	149	120	-19.5%	210/100
Lanco Infratech	14	12	-16.6%	25/9
CESC Ltd	331	281	-15.0%	340/186
Exide Industries	163	139	-14.8%	164/99
GMR Infra	23	20	-13.3%	34/18

Source: Equitymaster
Let us now discuss some more corporate developments. Oil and Natural Gas Corporation Ltd (ONGC) is planning to hire Reliance Industries' (RIL's) unutilized production facilities on the east to bring to production its gas discoveries in Krishna Godavari (KG) basin. ONGC already has made nine discoveries in its KG block KG-DWN-98/2, next to RIL's KG D6 block. It now intends to combine its discoveries with those in the neighboring block to begin gas production from 2016-17. As per the management, ONGC is in discussions with RIL regarding sharing of RIL's infrastructure such as underutilized gas processing and transportation facilities. As per ONGC's management, RIL management is open to such proposal. The latter has indicated that KG-D6 production is unlikely to touch 80 million standard cubic metres per day (mmsmcd) due to unexpected geological complexities. ONGC will firm up its plans once it has a clear indication of what capacities RIL can offer. It will come up with a formal field development plan (FDP) once it gets an approval from the government regarding the commercial viability of the discoveries.

Pharma major Dr Reddy's Laboratories Limited (DRL) is set to buy OctoPlus NV, for an offer price of Rs 1.9 bn in cash. OctoPlus is a service based specialty pharmaceutical company. DRL currently holds an irrevocable commitment from shareholders representing over 50% of OctoPlus' issued and outstanding shares. Further, the Executive Board and the Supervisory Board of OctoPlus have unanimously recommended the offer to the remaining shareholders. This deal will help to expand DRL's the expertise and scientific capabilities .DRL will provide OctoPlus with fee for service and milestone payments as consideration for services it will render for a maximum of £ 2 m over the next six months.

Coming to economic news, Planning Commission member Mr. Abhijit Sen has estimated a farm output growth of 0.5% to 1% this year. This is despite the fall in kharif output. The farm output has been affected due to sharp decline in yield of coarse cereals and pulses apart from a general slump in other crop groups As per Mr. Sen, the decline in kharif output for the year could be to the extent of 2% to 3%. However, he expects these losses to be offset in the rabi season. Mr. Sen mentioned that inflation is likely to remain high over the next 2 months due to increase in fuel prices.

The month of November will be crucial in light of upcoming US elections and its implications for the fiscal cliff. Back home, all eyes are set on corporate results and the Reserve Bank of India (RBI) upcoming monetary policy meet on October 30.