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Global Indices rally during the week
Sat, 27 Dec RoundUp

Most of the global stock markets closed the week on a positive note. The US indices closed at record high levels. The Dow Jones breached the 18k level during the week for the first time. The recent rally is as a result of strong economic data, as well as global economies taking various steps to spur the economic growth.

Japan's inflation slowed for the fourth month in November. Even the industrial production and retail sales witnessed unexpected drops. These trends point toward further weakness in the economy. These are trends indicative of the pressures on the government. The government is will unveil stimulus package in the next few days.

Chinese markets too witnessed buying activity. Drop in money-market rates and speculation that the government will take more measures to bolster the economy boosted the market rally. China's stock market closed up by 1.6% during the week.

Key world markets during the week
Source: Yahoo Finance

The Indian stock markets closed marginally down by 0.5%. FIIs continued their selling activity. Among the sectoral indices this week, realty and BSE Mid Cap stocks were the leading gainers, while capital goods and consumer durables 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.

As per a leading financial daily, the department of pharmaceuticals has presented a proposal to increase focus in new geographical markets such as Russia, Kazakhstan, Mexico, Brazil, Venezuala and Japan. The proposal also includes a clutch of non-traditional markets such as South Africa, Nigeria, Kenya, Saudi Arabia and the UAE. Even the European countries such as Spain, Greece, France and Italy are on the focus list to reduce dependence on the US markets. The market diversification plan comes at a time when the country's drug exports are increasingly facing regulatory backlash and pricing pressures in its biggest market US that accounts for 25% of the overall drug exports. India's pharmaceutical exports grew by a mere 1.2% to $14.8 bn in FY14.

2014 has been a dismal year for the auto industry in general. Excluding two wheelers, both commercial & passenger vehicle volumes. However, it seems that the next year i.e. 2015 will get a considerable head start in terms of volumes as quite a few new launches are expected to hit the street. For instance, Maruti is planning to launch a new SUV next year. An LCV is also expected from this auto major next year. Again, Hyundai is planning to launch a new compact SUV while Nissan and Renault have plans to launch a multi-purpose vehicle (MPV) in 2015. Considering a slew of launches planned in 2015 volumes are expected to get a huge tailwind.

As per a leading financial daily, the Union Cabinet is all set to give the go ahead for the spectrum auctions in Feb 2015. The Notice Inviting Applications (NIA) could be issued as early as 26-27th of this month. The bidding could start on 23 Feb 2015. The 2G airwaves to be auctioned will be in the 800, 900 and 1,800 MHz bands. The 3G spectrum to be auctioned in the 2,100 MHz band will be added to the NIA later after the regulator TRAI finalizes the base price for the same.

Market research agency Nielsen, expects the FMCG industry in India to return to double-digit growth trajectory in 2015 on the back of better consumer sentiment and lower inflation. The market agency expects the industry to grow by 7% in 2014 and witness a pick-up thereafter recording growths of 10% and 12% in 2015 and 2016, respectively. Around half of the estimated growth in future will be driven by volumes pointing to a favourable consumption growth. More than 50% of the growth in the FMCG industry in the past six years has been on account of better distribution reach and low unit packs.

Movers and shakers during the week
Company19-Dec-1426-Dec-14Change52-wk High/Low
Top gainers during the week (BSE-A Group)
Future Retail 81 101 25.1% 147/69
Opto Circuits 22 26 17.8% 45/18
Jindal Steel 129 150 15.8% 350/125
Oberoi realty 247 281 13.9% 298/182
Bayer cropscience 2,732 3,108 13.8% 3228/1378
Top losers during the week (BSE-A Group)
Reliance Communications 83 80 -3.5% 157/78
Core education 9 9 -2.9% 28/9
Gujarat Mineral development 125 122 -2.5% 181/100
Coromondel Int 306 300 -1.9% 340/196
Hindustan Unilever 766 752 -1.9% 829/536
Source: Equitymaster

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

As per a leading financial daily, the country's top private sector power players have decided not to bid for upcoming ultra mega power projects (UMPPs) of 32,000 MW after the government decided to accept the sole bid of National Thermal Power Corporation Ltd (NTPC) for Rs 500 bn Tamil Nadu & Orissa UMPP. The private power producers have opposed the standard bidding documents process and have informed the government about slack and one sided clauses in the document that have made it impossible for the corporate to participate. As per the management of a leading Mumbai based power firm, if the government does not agree to change the objectionable clause relating to effective pass through of fuel price risk, the private sector will not be able to participate in upcoming UMPPs bids.

Coal India and GAIL have signed an agreement to invest Rs 90 bn in a plant whereby they shall convert coal into gas and use it as a fuel to manufacture fertilizer. These two companies along with RCF and Fertlizer Corp of India shall develop the plant in Odisha by 2019. It is estimated that the plant will produce 1.3 million tonnes of urea and other fertilizers annually. Considering that India is deficient in urea production the new plant will certainly help bridge the deficit gap.

The Competition Commission of India (CCI) has given the green signal for GSK Pharma and Novartis deal. As per the deal, the UK-based parent company GlaxoSmithKline (GSK) will be acquiring the Swiss major's vaccine business, while the latter would purchase GSK's cancer drugs portfolio. The deal also involves purchase of the global human vaccines business of Novartis. Reportedly, as per the CCI, with regard to the vaccine deal, the said deal is not likely to have appreciable adverse effect on competition in India.

As per a leading financial daily, India's leading IT firms like Infosys and Wipro have become more aggressive in their attempts to win deals. Cut throat competition has resulted in aggressive bidding by large IT firms to win commoditised service contracts. The traditionally conservative firms are now seeking to commit money upfront to ensure that clients get a better deal. This form of aggressive pricing certainly helps IT firms win larger deals. However, they need to be careful not to compromise on their margins.

Both, micro and macro factors continue to impact the Indian stock markets. The Indian equity markets will watch out for cues from the winter session of parliament when some important reform bills are waiting in the wings to get passed. Oil prices continue to remain at lower levels, and investors must keep in mind that low prices may be difficult to sustain in the long run. Thus it makes more sense for investors to look out for stocks with strong fundamentals rather than short term tailwinds.

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Feb 20, 2018 09:25 AM