Barring Germany

Thu, 5 Mar RoundUp

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Barring Germany (up 0.3%), stock markets around the world mostly traded in the negative territory in the week gone by with major Asian stock markets leading the losses.

As per the economic data based on retail sales, Eurozone economy seems to be improving. Investors are further likely to take cues from the European Central Bank's policy meeting today, where it is expected to announce details of its €1.1 trillion quantitative easing program, which is due to start this month. Euro has hit 11 year low against the dollar ahead of the event.

The stock markets in the US have been trading on a cautious note. The private sector employment data has been negative and there is nervousness in the markets ahead of nonfarm payrolls and due to cut in the China's economic growth forecast to around 7% this year.

The Asian stock markets tripped as China slashed its GDP growth target to 7% for 2015, down from 7.5% last year. It is noteworthy that this is the lowest target in 11 years.

It was quite an eventful week for Indian economy and stock markets, with Reserve Bank of India (RBI) offering a surprise rate cut. While the announcement catapulted markets to fresh lifetime highs, profit booking led to some correction. The BSE-Sensex was trading lower by 0.2% (over the week).

Key world markets during the week

Source: Yahoo Finance **Price for US and UK markets as on 4th March 2015.

The pharma stocks were the biggest gainers during the week with stocks like Sun Pharmaceuticals Ltd and Ranbaxy Laboratories Ltd registering gains over 16% during the week. The other gainers were mid cap stocks and stocks in the capital goods sector. Among the pack of losers, realty and metal stocks witnessed maximum selling pressure.

BSE indices during the week

Source: BSE

Now let us discuss some of the key economic and industry developments in the week gone by.

The Reserve Bank of India cut the repo rates by 25 basis points to 7.5% from previous rate of 7.75%. This is the second rate cut by the RBI since January. However, it has kept the Cash Reserve Ratio (CRR) unchanged at 4%.

The economic data for the month of January 2015 suggests a slowdown. As per the financial daily, the core sector growth declined nearly 1.8% for the month of January. The eight core sectors that contribute about 40% to the Indian economy include coal, crude oil, fertilizer, refinery products, natural gas, steel, electricity and cement. Two sectors that led to fall in core sector growth were crude oil production and natural gas production. Each of the sector growth fell 2.3% and 6%, respectively. However, service PMI of India jumped to an 8-month high.

The second round of coal auction has kick-started and has been successful for companies like Adani Power, JSW Steel and Usha Martin. Adani Power won its maiden coal block in the auction. The company won Jitpur coal field of Jharkhand at the rate of Rs. 302 per tonne while Usha Martin and JSW Steel won coal blocks from Brinda and Sasai fields and Moitra field at the rate of Rs. 1,804 and Rs. 1,512 per tonne, respectively. The whole process of coal auction was monitored via MSTC's e-commerce official website.

The price of aviation turbine fuel (ATF) was recently increased by 8.2%. This hike has come after 7 consecutive cuts since the month of August 2014. It may be noted that ATF constitutes about 40% of any airlines' operating cost and hence an increase in the fuel price is likely to hurt an already cash strapped industry. Apart from an increase in ATF, prices of non- subsidized LPG cylinders have also been increased by Rs 5 in Delhi. This may not have much of an impact on consumers considering that a quota of 12 odd cylinders is available at subsidized rates to every household. Only those who consume more than the prescribed quota will be impacted by the hike.

The Government has passed the changes to Mines and Minerals Development Regulatory (MMDR) Bill. The Bill seeks to introduce a system of auction in granting prospecting licences. The intention behind passing the MMDR Bill was to ease the way business is done which involves land. As per this Bill the Central Government will become more authoritative than the State Government. This bill will likely benefit the companies which are already involved in mining.

The telecom spectrum bid which was kick-started this week gained good traction than expected. The Government was planning to fetch about Rs 800 billion from this auction. Surprisingly, it fetched Rs 620 billion from the telecom sector on the first day itself. The bands 900 MHz and 2,100 MHz witnessed strong bidding, however, 800 MHz also gained good attention. Lowest bidding was seen in the circles that cover Mumbai, Delhi and Karnataka.

Movers and shakers during the week

Company	25-Feb-14	5-Mar-14	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Ranbaxy Lab	688	806	17.1%	806/335
Sun Pharma	891	1,037	16.4%	1,037/553
Century Textiles	482	560	16.1%	651/326
Strides Arcolab	889	1,033	16.1%	1,033/349
Multi Commodity Exchange	1,065	1,225	15.0%	1,289/425
Top losers during the week (BSE-A Group)
ITC Ltd	400	346	-13.4%	410/312
Pipavav Defence	78	69	-12.0%	85/33
Future Retail	116	104	-10.3%	152/78
Opto Circuits	25	23	-9.1%	45/18
Lanco Infratech	6	6	-8.3%	15/5

Source: Equitymaster
Now let us move on to some of the key corporate developments of the week gone by. Reliance Infrastructure limited has acquired Pipavav Defence and Offshore Engineering Company for a sum total of Rs 8.2 billion. According to the leading financial daily, the company will be changing the management control and also will be offering to purchase 26% shares from the public at a per share price of Rs 66. This is subject to approval from SEBI Takeover Regulations.

Mahindra &Mahindra Ltd (M&M) has reported a decline of 10% YoY in the sale figures for the month of February. The company sold 38,033 units compared to 42,166 units same period last year. Domestic sales fell 11% YoY with sales coming at 34,918 units compared to 39,338 recorded last year. On the positive side, export figures increased by 10% YoY to 3,115 from previous year's figure of 2,828.

While the market sentiments are strong post the Union Budget and rate cut, we believe investors should still not lose track of fundamentals and have a bottom-up approach while investing in stocks for the long term.