Global stock markets end in red

Sat, 6 Apr RoundUp

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Majority of the global stock market indices pared gains over the week. After rallying on improving economic data and Fed's promise of continued monetary stimulus, the US stock markets ended lower this week on poor employment data. The US jobs report showed that employers were hired at the slowest rate in the last nine months.

Even the European stock markets were hit by poor US jobs data. This coupled with the warning of a deeper recession by European Central Bank President led to sharp downfall in all major European indices. The UK market was down 2.5%. The stock markets in Germany and France were down by 1.7% and 1.8% respectively.

Only the stock market in Japan posted a 3.5% jump over the week. The strong revival was after the Bank of Japan (BoJ) announced a huge monetary stimulus to infuse US$ 1.4 trillion in to the economy in less than two years. However, the other Asian markets declined on weak economic signals from US and Europe. The China market was marginally down by 0.5% as increase in the non-manufacturing Purchasing Managers' index in March aided in quelling the gloom to some extent.

The Indian stock markets ended the week in the red, down by 2% on economic slowdown concerns. The downfall in the markets was led by heavy selling in Mahindra Satyam, Tech Mahindra, National Mineral Development Corporation (NMDC), Siemens and Idea Cellular's shares.

Source: Yahoo Finance

Majority of the sectoral indices ended in red with FMCG (down 3.3%) and Metal (down 2.7%) witnessing the maximum losses. pharma (up 2.5%) and BSE Small Cap (up 1.9%) indices were among the few indices that registered gains during the week.

Source: BSE

Now let us discuss some of the economic developments of the week gone by. India's manufacturing sector clocked the slowest growth in 16 months in March as power outages hampered production and led to decline in new business orders. The volume of incoming new work increased the slowest in 16 months and export orders expanded at the slowest pace in seven months. The HSBC India Manufacturing Purchasing Managers' Index (PMI) stood at 52 in March down from 54.2 in February.

The output from eight core sectors fell 2.5% in February, against a growth of 3.1% in the previous month and a whopping 7.7% expansion in February 2012. The eight core sectors, which have a weight of 38% in the Index of Industrial Production, saw five of them registering a contraction in February year-on-year. Natural gas, coal, crude oil, fertilizer, and electricity generation posted lower output in February. Refinery products, steel and cement were the only sectors that registered growth.

As per provisional figures released by Reserve Bank of India (RBI), the banking industry recorded growth of 14% each in credit and deposits in FY13. These growth rates have fallen short of Reserve Bank of India (RBI) projections. RBI had forecast credit and deposit growth of 16% and 15%, respectively for FY13. Reportedly, loan demand was sluggish in FY13 due to economic slowdown. At the same deposit mobilization during the year was impacted as inflation-adjusted returns were negative due to high inflation.

Now let us move to some news from the corporate world. Largest coal miner Coal India Ltd (CIL) missed its production target of 464.1 m tonnes for FY13 by 11.9 m tonnes. Therefore, its supply target of 465.2 m tonnes fell short by 4.8 m tonnes during the year. The company supplies 80% of the country's coal output. In order to ensure fuel supply to the economy, CIL had been directed by the government to sign Fuel Supply Agreements (FSA) with consumers. The company has signed FSA's with 56 power plants so far.

The Indian Supreme court dismissed the petition of Swiss based company Novartis AG seeking patent for its cancer drug Glivec. The Supreme Court upheld an earlier verdict given by the tribunal court and Indian patent law. As per the earlier judgment, the said drug does not pass the test for innovation as specified under the Patent Act. Novartis has filed various litigations in Indian courts since 2006 to get a patent for Glivec in India. But the Indian law has refused to grant it a patent as it does not consider Glivec a new molecule and deems the drug to be an amended version of a known compound. The drug is sold by Cipla and Natco Pharma in Indian markets. The decision is favorable to both the companies.

Movers and shakers during the week

Company	28-Mar-13	5-Apr-13	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
MMTC Ltd	199	233	17.1%	890/193
Core Education	52	59	15.0%	345/46
Reliance Communications	55	63	14.1%	92/47
Multi Commodity	834	929	11.4%	1617/830
Adani Power	41	45	10.9%	74/37
Top losers during the week (BSE-A Group)
Mahindra Satyam	128	113	-11.6%	131/66
Tech Mahindra	1,059	961	-9.3%	1124/591
NMDC	138	125	-9.3%	203/124
Siemens	549	499	-9.2%	839/482
Idea Cellular	113	103	-8.7%	124/71

Data Source: Equitymaster
Larsen & Toubro Ltd (L&T) bagged an order valued at Rs 57 bn from the Rajasthan Rajya Vidyut Utpadan Nigam for setting up a 2 x 660 MW Supercritical Thermal Power Project on a complete Engineering Procurement & Construction (EPC) basis. The order involves design, engineering, manufacture, supply, erection and commissioning of two coal-fired thermal units of 660 MW each with supercritical parameters at Chhabra in Baran district in Rajasthan. This is the country's first complete EPC order for 2x660MW supercritical units placed by a state utility on the private sector. The project has a stringent completion schedule of 42 months for Unit 1 and 45 months for Unit 2. With this contract, L&T now has orders for supply and installation of 26 supercritical steam generators and steam turbine generators of 660 MW, 700 MW and 800 MW.

Mahindra & Mahindra (M&M) and Renault have been exporting their products XUV500 and Duster respectively to Europe since December 2012. With slowdown in the domestic market, other automobile companies have started focusing on exports to overseas markets. Fiat and Ford India are assessing opportunities to export SUVs to Europe, South Africa and Southeast Asia. Ford already exports Figo to 38 countries and is now looking at selling EcoSport in Europe. Meanwhile, Fiat is considering exporting right-hand drive models abroad.

The week gone by was largely negative for global stock markets due to weak economic signals from major economies. Even the Indian markets did not have much to cheer as manufacturing output continued to grow at a sluggish pace. However, with the Indian economy still registering a higher growth than most of the developed markets, the indices should revert back to its upward journey. Long term investors, however, will have to hold on to their patience. In fact investors should utilize opportunities to cherry-pick fundamentally good stocks available at cheap valuations.