Christmas cheers across global mkts

Sat, 24 Dec RoundUp

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Positive news from the US regarding new-home sales that are up 1.6% as compared to October 2011 and are up 9.8% as compared to last November overshadowed fears of the debt crisis in Europe for the time being. Other US economic data too indicated strengthening of the US economy. This led to the world markets closing the week higher adding sheen to Christmas celebrations.

The Indian stock markets were up 1.6% during the week. News about easing of food inflation along with global cues regarding strengthening of the US economy helped the markets post gains for the week.

Amongst the other world markets, all were in an upbeat mood except Japan (down by 0.1%) and China (down by 0.9%). France and the US were the top gainers up by 4.4% and 3.6% respectively.

Source: Yahoo Finance

Sectoral indices showed a mixed performance during the week. While Oil and gas index (up by 3.3%) and FMCG index (up by 3.2%) led the pack of gainers, capital goods (down by 3.2%) and metals (down by 1.6%) ended the week in the red on concerns of slowing economy.

Source: BSE

Let us take a look at the week's economic developments. Food inflation in India touched four-year low as prices of vegetables and wheat tumbled. The number eased to 1.81% in the week ended December 10 as compared to 4.35% rise in the previous week. However, we may note here that this is largely due to high base effect of the previous year. Onions were down over 49% YoY and potatoes fell by over 34%. Prices of pulses on the other hand are still rising (up by 14% YoY) along with milk, eggs, meat and fish.

Now let's take a look at key corporate events during the week. FMCG major Dabur has ventured into the professional grooming products market in India. Dabur is looking at garnering 5-10% market share in this through its brand "Fem". For this the company has created a sales team of 200 people and will be placing its products across parlours in the country. It is launching a range of facial kits including Fem Gold Professional Facial Kit and Fem Queen's Pearl Professional Facial Kit. Initially Dabur will be selling these only through beauticians in parlours and salons.

Another FMCG company Nestle India is planning to invest Rs 5 bn on its new plant in Gujarat. The plant that will manufacture Maggie noodles along with confectionary items is a part of the company's expansion strategy. It has been on an expansion spree to benefit from the growing demand for consumer products in India. It has already spent Rs 9.7 bn on capacity expansions. It may be noted here that domestic sales contribute 96% of the total sales for Nestle.

In news from the world of steel, consumption of the metal is set to reach 122 m tonnes by 2015. This number comes from the Assocham which has put the current annual consumption number at about 70 m tonnes. The demand for steel will get boost from agriculture, consumer durables, capital goods, oil and gas and water. However, the bottlenecks of availability of resources and infrastructure will continue to remain thereby hindering growth. For this, the Assocham believes that steel companies should look at mines in Mozambique and Australia to source coking coal.

Engineering major Larsen And Toubro (L&T) bagged a contract worth US$ 189 m from Abu Dhabi Gas Industries (GASCO). The contract is for engineering, procurement, construction and commissioning of the new Habshan-Ruwais-Shweihat gas pipeline. The pipeline will supply natural gas to Takreer's new refinery expansion project and Abu Dhabi's water and electricity authority. It is expected to get completed by September 2013. On its part, L&T has roped in a local vendor and hired a number of labourers for this. It is also looking at sourcing the equipment locally itself.

Movers and shakers during the week

Company	16-Dec-11	23-Dec-11	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Apollo Hospitals	483	564	16.8%	667/453
Balrampur Chini	34	38	13.6%	92/34
GTL Infra	8	9	12.4%	44/7
Sun TV	277	292	5.3%	550/221
GVK Power and Infra	10	11	5.3%	43/10
Top losers during the week (BSE-A Group)
Sterling Biotech	59	27	-53.6%	107/27
Syndicate Bank	93	74	-20.5%	133/78
REI Agro	19	15	-20.1%	30/16
UCO Bank	61	49	-19.1%	121/51
Allahabad Bank	147	120	-18.7%	236/125

Source: Equitymaster
Ashok Leyland received the approval from its board to increase its stake in Optare PLC. Optare is British bus manufacturing company and Ashok Leyland's existing stake in it is 26%. The auto company intends to raise it to 75.1%. The additional stake will be acquired at Rs 300 m. The acquisition will help Ashok Leyland get access to Optare's technology which includes modern range of city buses. The company will be going for refinancing option whereby it will be facilitating a credit-line to support Optare's re-banking options.

Lastly, a few telecom companies have been asked to terminate their 3G roaming arrangements by 3 p.m. on Saturday. This comes after the Department of Telecom announced that these roaming pacts were illegal. While Bharti Airtel , Vodafone and Idea Cellular have been asked to terminate these by Saturday, notices have been sent to others including Tata Teleservices and Aircel. The telecom companies are not too happy about the decision and called it arbitrary. Since the announcement came late Friday evening, they do not even have the option of any legal recourse.

With valuations in Indian stock markets getting closer to the lows of 2009, investors would do well to endow their portfolios with some heavyweight bluechip stocks and fundamentally sound mid and smallcap stocks that are currently available at attractive prices. While the volatility in stock markets may linger in the near term, patience and smart investing at the current levels can pay rich dividends in the longer term.