It was a stellar week for the world markets with all countries expect China closing the week in the green. A new deal worked out to resolve the Greek sovereign debt crisis resulted in gains across the world markets. The biggest gainer of the week was Singapore up 3.2%, while China closed the week down 0.9%. Among the other Asian markets, Hong Kong was up by 2.6% while Japan was up by 1.6%.
Indian stock markets were up by 0.9%. While the country faces medium term headwinds due to inflation, higher interest rates and policy paralysis, the new European debt deal resulted in FII inflows. This helped push the markets into the green. In Europe, the biggest gainer was France (up 3.1%). UK closed the week up 1.6% followed closely by Germany (up 1.5%). In the Americas, the US was up by 1.6% while Brazil was up by 1.3%.
Source: Yahoo Finance
Moving on to the performance of sectoral indices in India, stocks from the FMCG space were the biggest gainers while stocks from the consumer durable space were the biggest losers. As a result, BSE-FMCG index closed up 1.7% while BSE-Consumer Durable index closed down 1.7%. Amongst the other top gainers, BSE-IT index closed the week up 1.3% while BSE Small cap index was up by 1.2%. BSE-Metal and BSE-Sensex indices were amongst the top five performers of the week, up 1% and 0.9% respectively. Amongst the top losers of the week, BSE-Pharma and BSE-Auto indices were down by 1.5% each closely followed by BSE-Power index (down 1.1%). BSE-Capital Goods index was also amongst the worst performers of the week (down 0.2%).
From the two wheelers space Hero Honda declared its 1QFY12 results. The company's top line grew by 32% YoY to stand at Rs 56.3 bn. However net profits increased by only 13% YoY to stand at Rs 5.5 bn. This slower than top line growth was a result of higher manufacturing costs as a result of increase in input costs. Sales volume of the company grew by 24% YoY to stand at 1.5 m units which is the highest unit sales for any quarter. Operating margins stood at 10.2% as raw material costs went up by 37% YoY. Going forward, the company's management expects to see raw material costs soften which would help expand margins. The company has reiterated its guidance for selling 6 m units during the current fiscal.
From the oil & gas sector, Petronet LNG declared results for the first quarter of FY12. The company witnessed an impressive 83% YoY growth in the topline on account of increase in volumes and higher capacity utilization. The company has done volumes of 133 trillion BTUs (British Thermal Units) this quarter, up 6% with respect to the previous quarter. Out of the total, 64% cargoes were long term contracts. The regasification charges also registered an increase of 5% as compared to the previous year. The operating profits for the quarter registered a growth of 77% YoY. The bottomline also registered an impressive growth of 131% YoY. As per the company management, the company has received approval for its capacity expansion plans. It is targeting expansion to 15 million tonne (MT) versus a current capacity of 10 MT.
Coming to the pharma sector, Dr Reddy's announced its first quarter results for financial year 2011-2012 (1QFY12). Sales stood at Rs 19.8 bn and were up almost 18% YoY. The strong sales number was driven by growth in North America, Russia & CIS countries. New launches from the Bristol facility helped in the strong performance in North America. However, the India business grew at a mere 6% YoY which is low as compared to the overall industry rate of around 14% YoY. In the domestic markets, 12 new products were launched during the quarter. The Research & Development expenditure stood at Rs 1.2 bn which is a growth of 21% YoY. Net profits stood at Rs 2.6 bn and were up by around 25% YoY.
From the IT sector, Wipro reported its quarterly results for the first quarter of fiscal year 2011-2012 (1QFY11). The company reported revenues at Rs 85.6 bn, up 3.2% QoQ (quarter-on-quarter). The bottom line declined by a 2.9% on a quarter on quarter basis. Operating margins for the quarter stood at 19.4% as compared to 20.2% seen during the previous quarter (ended March 2011). The decline in margins was on account of higher employee costs as well as higher marketing costs. The company has closed two large deals worth US$ 500 m in the banking and financial services industry this quarter. Attrition rates for the company stood at 22.6% which is nearly flat as compared to that seen in the previous quarter (4QFY11).
The banking sector too saw some major developments over the week. Banks in India are expected to report a drop in CASA ratio for the quarter ended June 2011. Typically, the first quarter is a dull one for the industry with fewer transactions. But, this time around the problem lies elsewhere. With interest rates for fixed deposits being high, customers are less willing to put their money into the non or less interest bearing current and savings accounts. At present, one year deposits earn 9-10% rate of interest on average as against 4% in savings account. Some of these customers are also transferring their money from CASA accounts to fixed deposits. Some banks have already declared results for the quarter and the trend is visible across the sector. The industry leader, HDFC Bank reported a drop in CASA ratio from 51% to 49.1%. For Kotak Mahindra Bank, this drop was 3% from the earlier 30% to 27%. For Axis Bank and Union Bank, this drop was marginal. With interest rates expected to climb further, the trend of lower CASA may continue into the next quarter as well.
Moving on to the key economic news during the week, proposed FDI (Foreign Direct Investment) in retail may finally see the light of the day. The Government of India has moved another step closer to allowing 51% FDI in multi brand retail. The committee of secretaries unanimously agreed to allow foreign players in the retailing industry. However, the global players interested in opening shop here need to follow certain conditions. They have to invest US$ 100 m out of which 50% should be in back-end supply chain. Initially they may be allowed to set their stores only in the metro and later on in the rest of the country too. This is expected to be the last meeting among the committee of secretaries and the proposal will now be placed before the cabinet. It may be noted that foreign players like Wal-Mart, Carrefour and Tesco have been eagerly awaiting the final decision. Meanwhile, the Indian retailers have expressed their satisfaction over this new development.