The week gone by was a favorable one for global markets. Barring Singapore (down by 0.5%), all the markets registered gains over the week with Hong Kong (up 2.6%) and China (up 2.5%) leading the pack of gainers. The gains were largely on account of a pickup in Chinese factory activity.
The US dollar witnessed 7 week high level ahead of US job data. The US markets (Dow Jones) gained 1.0% over the week, boosted by better than expected ADP private sector employment report and ISM manufacturing reading.
As compared to the global markets, the Indian stock markets performed relatively poor with just 0.7% gains. The lackluster performance was mainly due to stubborn stance adopted by Reserve Bank of India (RBI) to keep the rates unchanged. Though the cash reserve ratio (CRR) was reduced by 25 basis points repo rate was untouched. What further affected the sentiments was its forecast of still higher inflation and lower GDP growth.
The European stock markets also ended the week in green despite weak manufacturing data from Germany, France, Spain and Italy reflecting
Eurozone's troubles. Among the key European markets, Germany and France were up by 2.4% and 2.2% respectively.
Coming to the performance of sectoral indices, it was a mixed week with Consumer durables (up 5.1%) and auto sector (up 3.9%) leading the pack of gainers. However, FMCG (down 0.7%) and Capital goods (down 1.9%) sectors registered maximum losses during the week.
In the power sector, Power Grid Corporation of India Ltd (PGCIL) has announced its results for the second quarter of financial year 2013 (2QFY13). The company reported a 36.3% year on year (YoY) of revenue growth during the quarter. The growth in the topline was driven by 38% YoY increase in transmission income (95.9% of the company's total revenue). Operating profits during the quarter grew by 42.8% YoY as operating margins improved from 82.6% in 2QFY12 to 86.5% in 2QFY13. Other income declined by 19.2% YoY while depreciation charges increased by 38.3% YoY. The company reported a prior period income of Rs 140 m during the quarter. The net profits for the quarter grew by 58.9% YoY over the corresponding period of the previous financial year.
In the logistics space, state-run logistics firm Container Corporation of India Ltd (CCIL) has announced financial results for second quarter ended September 30, 2012. During the quarter, the company's standalone revenue grew by 6.1% on a year-on-year (YoY) basis. The operating profits for the quarter declined by 2% YoY mainly on account of higher rail freight expenses. As such, operating margins from 26.4% in 2QFY12 to 24.4% in 2QFY13.The net profit growth for the quarter came at 32.5% YoY. However, this was on account of a low base last year due to one-time tax adjustment in 2QFY12. Excluding this one-time item, the growth in the net profits came at 4.6% YoY during the quarter.
In software space, Wipro has announced its results for the quarter ended September 2012 recently. The gross revenues for the quarter grew by 1.5% on a quarter on quarter (QoQ) basis while profits increased by 1.9% QoQ. The IT Services business' revenues (78.7% of total revenue in rupee terms) grew by 10.3% QoQ during the quarter in Rupee terms. In US dollar terms, the segment's revenue was higher by 1.7%. At the operating level, profits were higher on the back of a 1.1% QoQ margins expansion (operating margins stood at 19.9% during the quarter). Wipro has announced the demerger of its non-IT businesses - which include the consumer care & lighting (incl. furniture business), infrastructure engineering (hydraulics & water business), and medical diagnostic product & services business - into a separate company to be named Wipro Enterprises Limited.
Let us now discuss some more corporate developments during the week. Healthcare major Piramal Healthcare has tied up with Japanese firm Fujifilm Diosynth Biotechnologies for a contract manufacturing deal. The deal would be aimed at developing antibody drug conjugates (ADC) and is expected to cover over 150 bio-pharmaceuticals and more than 300 batches of ADC which would cover over 30 different new chemical entities. It must be noted that ADC is a field in bio-pharma that focuses on targeted therapy, specifically in the treatment of cancer. While in traditional chemotherapy even good cells get killed in the process, in targeted therapy, specific cancer-causing cells are targeted.
In another development, Gas Authority of India Ltd. (GAIL) is planning to buy a stake in Reliance Gas Transportation Infrastructure Ltd (RGTIL). RGTIL, originally a subsidiary of Reliance Industries, operates the East-West pipeline that expands from Andhra Pradesh to Gujarat. It is important to note here that Petroleum & Natural Gas Regulatory Board (PNGRB) had recently cancelled RGTIL's license to build and operate four other pipelines because of inordinate delays. As per GAIL's management, the company will take the decision only after proper due diligence. As per an industry official, GAIL wants a controlling stake in RGTIL which is not acceptable to current promoters. GAIL's management has not yet disclosed the details of negotiations with RGTIL.
Coming back to economic news, the Finance Minister Mr. P Chidambaram disclosed the five year fiscal road map today. The plan for fiscal consolidation aims to promote investments and growth and to keep inflation under control. Moreover it is expected to check the potential rating downgrade for the economy. As per the plan, the government will work towards limiting fiscal deficit to 5.3% of GDP in FY13 (higher than the budgeted deficit of 5.1% of GDP) and will further trim it down to 3% by FY17. It may be noted that the Vijay Kelkar Committee had warned about fiscal deficit shooting up to 6.1% in FY13 in the absence of reform initiatives. As part of the roadmap, the government aims to raise Rs 300 bn from disinvestment and Rs 400 bn from sale of telecom spectrum.
In the coming week, US presidential elections and US job report will be the key events to impact the global markets. Back home, the corporate earnings announcement will continue to drive the Indian stock markets.