A mixed week for global markets

Sat, 16 Feb RoundUp

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The week gone by was a mixed one for the global stock markets. UK and Hong Kong were the top performers during the week followed by Singapore and France. Brazil and Germany were amongst the top underperformers. Sentiments were mixed on the back of news of a slump in Europe's biggest economy Germany, which contracted by 0.6%. This is believed to be the country's worst performance since early 2009. Chinese markets were closed on account of the Lunar new year.The Indian stock markets were down 0.1% during the week, falling to their lowest level in the year till date. This was the eighth consecutive session where the markets registered a fall. The jittery market sentiments are seemingly on the back of a cautious approach taken by investors before the Union Budget which is scheduled to take place at the end of the month.

Source: Yahoo Finance

Amongst sectoral indices, healthcare and banking stocks were amongst the top performers during the week gone by followed by auto and Information Technology (IT) stocks. Realty and engineering stocks were not in favour this week as their respective indices the BSE-Realty Index and BSE- Capital Goods indices were down by 5.4% and 4% respectively.

Source: BSE

Now let us discuss some of the corporate developments of the week gone by. A handful of major companies announced their results for the quarter ended December 2012 during the week gone by.

FMCG major, Britannia Industries posted an 18% YoY increase in revenues during the quarter. However, a steep rise in advertisement and promotion expenses offset the cost savings arising from easing input prices and rationalization of other expenses. As a result, the operating margin remained flat at 6.3%. At the net level, earnings grew by a muted 5.2% YoY on account of higher depreciation and a 37% YoY fall in other income earned during the quarter.

Steel major, Steel Authority of India Ltd (SAIL) reported a marginal (0.5% YoY) decline in revenues. The company's net profits declined by 23.4% YoY on account of higher finance costs and lower net sales realizations. Net sales realizations declined due to a subdued market. An increase in royalty of raw materials also impacted SAIL's profitability. Regarding outlook, the management has suggested that 2013 is an important year for SAIL with new capacities coming up in its plants. The management has said that the company is well positioned to gain from the growth phase of the economy and steel industry in near future.

Cement major, ACC 's consolidated net sales increased marginally by 1.9% YoY during the quarter as volumes remained almost flat due to difficult market conditions. Operating margins contracted from 14.4% in 4QCY11 to 11.7% in 4QCY12. Other income rose by 37.8% YoY, while interest expenses increased by 42.4% YoY. Lower operating margins and higher interest expenses caused the profit before tax (PBT) to decline by 12.7% YoY. Net profits declined by 46% YoY on account of higher tax incidence during the quarter. As for the full year 2012, sales increased by 11.3% YoY, while net profits dropped by 18.6% YoY.

Leading Indian steel manufacturer Tata Steel's consolidated net total income from operations stood at Rs 321.1 bn, a figure lower by 3% on a year-on-year (YoY) basis. The company's net losses stood at Rs 7.6 bn, against losses of Rs 6 bn in the corresponding quarter of the previous financial year. The poor performance was attributed to weak European operations. On a standalone basis, Tata Steel reported a revenue growth of 11.8% YoY from Rs 83.8 bn in 3QFY12. The Indian operations reported net profits of Rs 10.5 bn, lower by 26.4% YoY. The company is now focusing on building a 3 million-tonne plant at Kalinganagar, Odisha, and also on expanding its Jamshedpur unit.

Leading mining giant Coal India reported a revenue growth of about 13% YoY during the quarter gone by. The growth in sales was led by 9.1% YoY increase in coal offtake which stood at 120 million tonnes. Operating profits declined by 5.8% YoY on account of increases across most major cost heads. Operating profit margins declined from 29.7% in 3QFY12 to 24.8% in 3QFY13. However, higher other income, lower depreciation charges and interest expenses caused the bottomline to increase by 8.9% YoY to Rs 44 bn. Net profit margins stood at 25.4% against 26.3% in 3QFY12. The PSU mining firm has set a coal output target of 464 million tonnes for the financial year 2013-14 (FY14).

State Bank of India (SBI) reported an interest income growth of 9.5% YoY. This was driven by a 16% YoY growth in advances. This was lower than the 3.8% seen during the same period last year. The net interest income declined by 3.2% YoY during the quarter. The fall in net interest income was offset by the increase in other income during the quarter. As a result, net profits increased by 4.1% YoY. The net interest margin (NIM) stood at 3.4% in 9MFY13. The NPA increased to 2.59% in 9MFY13 from 2.22% in 9MFY12. Capital adequacy ratio for the bank stood at 12.21% at the end of December 2012 as per Basel II.

Moving on to other corporate developments during the week, Blue Star is believed to be planning to set up a new manufacturing facility in South India at an estimated cost of Rs 1.7 bn. This it is doing to get an increasing share of the Rs 65 bn room air conditioning market in India. While the company has the largest market share in the commercial air conditioning space, it is has failed to make its presence felt in the room air conditioning segment given its late entry in 2011. Besides it has only two dedicated plants in Himachal Pradesh to cater to the room air conditioning market, which have failed to keep up pace with the increasing demand of Blue Star's products. Blue Star is aiming to grow the sales of room air conditioners by 9% in 2013.

Movers and shakers during the week

Company	8-Feb-12	15-Feb-12	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Pidilite Industries	237	257	8.5%	257 / 145
Emami	575	623	8.4%	623 / 361
Berger Paints	170	183	7.8%	192 / 100
MMTC	512	552	7.7%	875 / 507
Tata Motors	286	304	6.5%	875 / 507
Top losers during the week (BSE-A Group)
Unitech	35	30	-13.5%	40 / 18
Suzlon energy	25	22	-12.9%	31 / 15
Multi Commodity	1,351	1,190	-11.9%	-
Opto Circuits	68	60	-11.2%	223 / 58
IFCI	34	30	-11.0%	48 / 24

Source: Equitymaster
The Indian auto industry continued to post subdued sales volume data for January 2013. Domestic passenger car sales declined 12.4% to 173,420 units in January this year. Further, as per Society of Indian Automobile Manufacturers (SIAM), total two-wheeler did better as sales increased 8.4% to 1,206,937 units. In this, motorcycle sales grew 7.4% to 886,527 units. Total sales of commercial vehicles declined 9.5% to 63,218 units. Total sales of vehicles across categories registered a growth of 5.3% to 1,561,104 units in January 2013 against 1,482,437 units in January 2012. Slowdown has gripped the Indian auto industry for quite a few quarters now. Most of the auto companies have declared results for the third quarter ended December 2012. While performance at the topline level was quite poor on account of tepid demand, there was considerable pressure on margins as well.

Worried over the decline sales of medium and heavy commercial vehicles, which are believed to be lower by 40% YoY, SIAM recently stated that a turnaround for the Indian auto industry is only possible with government intervention. This would be in the form of excise duty cuts for both the segments. In addition, SIAM has proposed a second round of Jawaharlal Nehru National Urban Renewal Mission scheme. Not only would this help improve the sales volumes for the CV manufacturers, but also would boost sentiments.

The Indian stock markets have been lingering in the range of 19,500 to 20,000 for a while now. Since the major economy related numbers and data have been released, the next major event for the markets to look forward to is the Union Budget, which is scheduled for the end of the month.