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A mixed week for global stock markets
Sat, 8 Nov RoundUp

The performance of the global stock markets for the past week stood mixed. The stock markets in the US (up 1.1%) ended the week at a new high on expectations of positive economic data, lower interest rates and positive outlook for earnings. The recently announced jobs data showed steady gains; however, the stagnant wages tempered optimism. A steep decline in rouble and problems around Ukraine weighed heavy on the European stock markets. The stock markets in Germany and France were down by 0.4% and 1.0% respectively during the week.

Coming to Asian stock markets, the stock markets in Japan (up 2.8%) led the gains during the week. The markets gained ground from investor expectations regarding money inflows with European Central Bank suggesting possibility of further monetary policy measures to counter economic weakness and downward price pressure in the Eurozone. The stock markets in China and Hong Kong were down by 0.1% and 1.9% respectively during the week while stock markets in Singapore gained 0.4%.

Key world markets during the week
Source: Yahoo Finance

The Indian stock markets witnessed flattish performance over the week, taking a retreat on account of profit booking. Among the sectoral indices this week, realty and healthcare were clearly the top performers, while metal and power stocks registered maximum losses.

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 International Ratings Agency Moody's has maintained India's sovereign rating and has claimed that a ratings upgrade should take a while. The agency has mentioned about revisiting its estimates in the light of improvement in core macroeconomic parameters of the country. It is also confident that certain core measures announced by the central bank should boost the ratings profile of the nation. However, the concerns over the government meeting the fiscal deficit target of 4.1% this year and the higher general deficit remain. The agency cited that it would closely monitor the next Budget, monetary and fiscal policy framework and banking sector reforms in order to review the institutional strength and the constraints on India's fiscal profile. Only then will it be in a position to take a call on India's sovereign rating upgrade.

As per a leading business daily, despite being a festive month, October month witnessed weaker-than expected sales by leading automobile companies. The total sales of Maruti Suzuki stood at 103,973 units, down 1.1% from 105,087 units in October last year. Sales of Hero MotoCorp Ltd fell 8% to 575,056 units as compared with 625,420 a year ago. Mahindra and Mahindra Ltd too reported a 15.7% decline in its sales to 40,274 units, while Tata Motors Ltd posted a 17% decline in sales to 38,760 units. Bajaj Auto reported sales of 386,017 units in October compared with 399,450 units in September. Car sales, overall, declined by marginal 1% in September to 1.5 m units.

Movers and shakers during the week
Company31-Oct-147-Nov-14Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Opto Circuits1922 16.0%45/18
MAX (I) Ltd354402 13.5%411/178
Lanco Infratech77 12.3%15/6
Thermax Ltd892993 11.4%999/609
Glenmark Pharma719798 10.9%801/489
Top losers during the week (BSE-A Group)
IPCA Labs735661 -10.0%907/635
GAIL529485 -8.3%551/310
Jain Irrigation9184 -7.8%133/56
NMDC Ltd171158 -7.7%196/123
ABB India Ltd 1,1671,085 -7.0%1,264/568
Source: Equitymaster

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

Power equipment major Bharat Heavy Electricals Ltd (BHEL) has bagged a contract for the supply and installation of the electrostatic precipitator (ESP) package for the super critical 2x800 MW Darlipali thermal power project. The order is valued at around Rs 2.2 bn, and has been placed on BHEL by National Thermal Power Corporation (NTPC) for its upcoming project of super critical rating in Odisha. It may be noted that with the company having secured this large order, 13 of the 18 ESPs ordered for the 660/800 MW supercritical units of NTPC under the cabinet approved 'Bulk tender' power projects have been secured by BHEL, and is reflective of BHEL's dominance in the power generation equipment industry in India.

The leading domestic two-wheeler maker Hero MotoCorp Ltd is planning to enter European markets, including Italy, Spain and France, by end of next year with the launch of its hybrid-scooter 'Leap' in these regions. This will be the company's first phase of expansion. This is likely to be followed by expansion in UK and Germany in the next phase. Over a period of time, the company will bring more models including scooters and motorcycles to these regions. The company is looking for potential partners and is even open for merger and acquisition opportunities to enter these markets.

India's leading telecom firm Bharti Airtel will hike post paid rentals in next month. The increase in rentals is about 12% and would be targeted towards low rental plans. This follows the move made by the company in September when it had hiked mobile internet data rates by about 33% for pre-paid customers. These are signs that pricing power is slowly but surely returning to the industry.

As per a leading financial daily, US-based private investment firm Bain Capital is selling shares in India's leading two wheeler maker Hero MotoCorp worth US$ 200 million, with an option to sell more. The private investment firm is selling 4.3 million shares at a price range of Rs 2,859.58 to Rs 2,963.30. It must be noted that as of end-September, Bain Capital held about 11.5 million shares in Hero MotoCorp, which is about 5.77% of the company's total equity.

Let's move on to some of the key corporate results that were declared during the week...

Titan Company had announced its results for the quarter ended September 2014 recently. The company reported a 57% YoY rise in revenues while profits rose by 29% YoY respectively during the quarter. The company's management shared its view on current market scenario as far as discretionary spending is concerned. It indicated that the improvement in consumer sentiment is not so visible in terms of consumer behavior as actual spending on the part of consumers has been low. The quarter was marked by the premature closure of golden harvest scheme and the big jump in sales was largely due to its customers preponing their gold jewellery purchases.

FMCG major Nestle India posted a tepid 9% YoY topline growth with the largest domestic segment posting 10% growth arising from better realizations in the quarter ended September 2014. Export sales declined by 3.9% mainly due to lower coffee exports. The operating margin dipped by 0.2% for the quarter due to steep rise in price of milk and its derivatives in India. At the net level, margin was intact at 12.1% due to 98% fall in interest charges.

Cadila Healthcare has declared September 2014 quarter results. Net sales grew by 21.2% YoY. US formulations and Domestic API were the key contributors for this robust performance. Both these segments grew by 67.6% YoY and 115.6% YoY respectively. The operating margins too surged by 520 bps to 19.97% during the quarter. Net profits surged by 51% YoY for the quarter.

Going forward, the market sentiments are likely to be influenced by the data on inflation to be announced in the coming week and September quarter results for the companies. However, we would suggest investors to focus on fundamentals and follow a bottom up approach to investing rather than getting influenced by short term price movements.

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Jan 19, 2018 (Close)