Positive 2013 for global indices

Sat, 5 Jan RoundUp

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The global markets kick started 2013 with gains as all major global indices ended the past week on a positive note. The positive sentiments were largely led by the US lawmakers reaching an agreement, just in time to avert the fiscal crisis. Further, positive economic indicators from China (Purchasing Managers Index remaining steady) also added to the optimistic sentiments.

With gains of about 3.8%, the US markets were the top gainers last week followed by France and Hong Kong with gains of about 3% each. China and Singapore reported weekly gains of about 2% and 1% respectively. As for the Indian markets, the same were up by 1.7% for the week.

Source: Yahoo Finance

Barring stocks from the FMCG sector - which was down by about 0.8% - all sectoral indices ended the week in the green. Gains were led by stocks from the realty, oil and gas and consumer durables spaces with their respective indices ending up by 5.2%, 4.1% and 3.5% respectively. Smallcap stocks also seemed to be in favour as the BSE Small Cap Index ended with weekly gains of 3.7%. The BSE Mid Cap Index however ended marginally lower as compared to last week.

Source: BSE

Now let us discuss some of the key corporate developments of the week gone by. It was reported that India's largest private power player, Tata Power is looking at setup a 12,500 megawatt generation capacity abroad. It is looking to setup plants in countries such as Indonesia to meet its growth target. Domestically, the company is facing problems in the form of limited fuel supply and delay in approvals. India presently has 206,000 megawatt generation capacity and needs to increase it to 350,000 megawatt by 2020. In its 90 year history, Tata Power has managed to set up only 6899 megawatt of capacity.

Automobile companies reported their sales numbers for the month ended December 2012 this week. Mahindra & Mahindra (M&M) reported a 5.9% increase in sales (45,294 units) during the month. The company's domestic sales increased by 6% YoY, while its exports were up by 4.2% YoY.

Bajaj Auto reported a 13% YoY rise in volumes as compared to the same month last year, while its commercial vehicles sales volumes were up by 9% YoY. As per the company, the consolidated sales figure and export figures are up by 13% and 5% respectively. Bajaj Auto's sales volumes growth figures came in better than those of its counterpart Hero Honda, which reported flattish volume growth for the same month. Hero Honda attributed this slowdown to the fact that December is usually a month which witnessed sluggish growth in volumes as customers tend to postpone their purchases to the next year.

Further, India's second largest commercial vehicle manufacturer Ashok Leyland registered a 19.3% YoY decline in sales during the month of December 2012. The total vehicle sales during the month stood at 7,299 units, as against 9,048 units during December 2011. The company's light commercial vehicle (LCV) product 'Dost' reported robust sales of 2,069 units as against 1,099 units in December 2011, a growth of 88% YoY. However, sales of commercial vehicles dipped by 34.2%, from 7,949 units in December 2011 to 5,230 units in December 2012.

Passenger vehicle major, Maruti Suzuki reported a 3.2% YoY increase in volumes, which stood at 95,145 units for the month. The sales were led by the company's multi utility vehicles Ertiga as well as the Dzire. Domestic sales stood at 82,073 units (86% of total volumes) and increased by 6% in a year on year basis. Export volumes, which contributed to the balance, declined by 11% YoY. In the year till date Maruti's sales were up by 7% YoY to about 828,000 units. Domestic sales were up by 8% YoY, while exports were down by about 3% YoY.

It may be kept in mind that despite the heavy discounts, December auto sales witnessed a slowdown due to weak economic sentiment. Sales were also dampened by the interest rates and high fuel prices. Going forward, the auto industry expects some corrective measures by the government to boost sales in 2013.

Moving on from news in the auto space to the information technology sector. During the week, it was reported that mid-sized IT firms are looking to go slow on their salary hikes this year. Also, these companies plan on hiring lesser number of people from campuses. The reason behind the same is the uncertainty in the US and European markets. Clients in those regions are believed to be cautious on their technology spends. The salary hikes in IT firms usually take place during the first quarter of a financial year, while campus recruitments usually take place in the months of November and December each year. It is believed that while there is de-growth, companies are being more selective about hiring. A case in point is Mahindra Satyam, which stated that it plans to cut down on its campus hiring by about 50% in the coming year due to the unpredictable business environment. Managements of other mid-sized firms such as Mastek have also shared similar views.

Cement prices are believed to have fallen by 10% over the past two months. This is despite the fact that the peak construction period has kicked in. Cement prices seemed to have slipped to Rs 270 presently (for a 50 kg bag). Last year, prices were marginally lower at 267. Prices in the month of October had touched Rs 300 a bag. It is believed that the demand during the current times has not picked up as what was anticipated. Also, factors such as lack of other building materials such as bricks (in the northern region), along with a shortage of labourers have led to the overall construction activity not rising.

Movers and shakers during the week

Company	28-Dec-12	4-Jan-13	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Indiabulls Financial Services	269	311	15.7%	310 / 140
IFCI	33	38	15.3%	48 / 22
Gitanjali Gems	511	585	14.6%	588 / 297
Muthoot Finance	201	226	12.6%	234 / 106
Indian Bank	194	215	11.0%	265 / 152
Top losers during the week (BSE-A Group)
Suzlon Energy	19	18	-4.7%	32 / 15
Madras Cements	249	240	-3.8%	248 / 102
Ipca Labs	522	506	-3.0%	527 / 273
Emami	600	585	-2.6%	622 / 325
United Breweries	950	927	-2.5%	1,007 / 340

Data Source: Equitymaster
During the week it was reported that India's fiscal deficit for the April to November 2012 period stood at Rs 4.1 trillion. This figure is a little over 80% of what was anticipated at the start of the year. The budgeted fiscal deficit was budgeted to be Rs 5.14 trillion or 5.1% of the country's GDP for the year ended March 2013. The latter has been however been revised to 5.3% in recent times. The net tax receipts stood at Rs 3.7 trillion, while the total expenditure stood at Rs 8.7 trillion. Finance Minister P Chidambaram has reportedly stated that tough decisions are required in order to bring the fiscal deficit to more comfortable levels. These include controlling expenditure and augmenting resources. As per the FM, the three year target is to bring down the deficit level to about 3% (of GDP).

Further, as per World Bank chief economist, Kaushik Basu, India's current account deficit (CAD) (which stood at 5.4% of GDP in the quarter ended September 2012) is a cause of concern. However, he believes that market factors will gradually stabilise it. According to him, given India's proper floating exchange rate, the CAD is not as worrying. This is because there are automatic market stabilizers which will begin to kick in. Thus for the time being markets remain cued in to the upcoming third quarter results reason.