Global markets hit fresh highs

Sat, 11 May RoundUp

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All the major global indices, continued to have a positive outing over the week. Stocks moved further into record territory during the week as investors warmed to good economic data and earnings reports. A strong US jobs report which showed that weekly jobless claims fell to a five-year low helped allay fears of slowdown in the world's largest economy and bolstered the US markets which were up by 0.97%.

European equities punched fresh five-year highs, continuing to draw support from central bank stimulus. Investors were looking to a meeting of Group of Seven finance chiefs for reaffirmation of policymakers' commitment to economic stimulus - the key driver of equities' 11-month long rally and for clues on possible further measures from central banks. The stock markets in Germany posted the sharpest gains of 1.9%. The UK market was up by 1.6% following upbeat UK manufacturing and industrial data for March 2013.

The Indian markets closed the extended week (The Bombay Stock Exchange held a special trading session on Saturday) on a positive note with the shares in the FMCG space leading the gains. The Indian stock markets were up by 2.6%. Only the Brazilian market saw a decline and was down by 0.7%. The Chinese market was up by 1.9% over the week, even though higher than expected Chinese inflation data stoked fears that the Chinese government would withhold additional easing The Japanese market spiraled higher after the U.S. dollar climbed atop the 100-yen level for the first time in four years, stoking sharp gains in exporters.

The strong performance in the Indian stock markets was aided by strong buying in MMTC, Berger Paints, Muthoot Finance & Essar Oil.

Source: Yahoo Finance

All the sectoral indices ended in green with FMCG (up 4.68%), Auto (up 4.04%), Consumer Durable (up 3.82%) and Banking (up 3.05%) witnessing the maximum gains.

Source: BSE

Now let us discuss some of the economic developments of the week gone by. The growth in Index of Industrial Production (IIP) witnessed a pick-up in March and grew by 2.5% YoY as compared to 0.6% YoY growth registered in February. The robust rise was aided by the manufacturing and electricity sectors that grew by 3.2% and 3.5%, respectively on a year-on-year basis. Ten out of 22 industry groups in the manufacturing sector have clocked growth during March. However, mining output was down by 2.9% YoY. Capital goods grew by 6.9% YoY in March. The cumulative growth in IIP for the period April-March 2012-13 stood at 1%. During this period, the manufacturing and mining sectors grew by 1.2% and 4%, respectively whereas mining output fell by 2.5%.

Industry's performance in the last financial year was the worst in the past 20 years but the smart recovery in March cushioned the shock somewhat. The IIP in 2012-13 grew by 1%, down from 2.9% in the previous year and manufacturing output grew just 1.2%.

Now let us move to some news from the corporate world. With the earning season in full swing, a number of companies have declared their quarterly results over the week.

HDFC Limited declared its results for the fourth quarter and financial year 2012-13 (FY13) yesterday. Interest income has grown by 21% YoY in FY13 on the back of 31% YoY growth in retail loan book and 24% YoY growth in total loan book. Net interest margin has fallen by 0.2% to 4.3% in FY13 from 4.1% in FY12. Other income has increased by 16.9% YoY in FY13 on the back of higher gains booked on sale of investments. Net profit has grown by 17.6% YoY for FY13 which is in line with the increase in net interest income. For 4QFY13, profits have grown by 17.3% YoY despite provisions remaining flat. Capital adequacy and gross NPAs stand at 16.2% and 0.7% respectively at the end of March 2013. The Company has declared a dividend of Rs 12.5 per share for FY13 (dividend yield 1.4%).

Indian pharmaceutical firm Lupin has announced its financial results for the quarter ended March 2013 (4QFY13). The company reported consolidated net sales of Rs 25,374 m, higher by 34.7% over the corresponding quarter of the previous financial year (Rs 18,832 m). Net profits during the quarter surged by 162.3% year-on-year (YoY) to Rs 4,081 m as against Rs 1,556 in 4QFY12. For the financial year 2012-13 (FY13), the company reported sales of Rs 94,616 m, a rise of 35.9% YoY. At the bottomline level, net profits rose by 51.5% YoY to Rs 13,142 m.

Corporation Bank announced results for the fourth quarter and year ended March 2013. The bank posted a marginal growth in net profits on account of higher provisioning and lower margins during the quarter. While total advances were up by 18% YoY as of March 2013, deposits increased by 22% YoY. Total provisions during the quarter rose by 22% YoY. The net interest margin declined to 2.29% in FY13 from 2.48% in FY12. Going forward, the bank will need to expand its CASA base substantially. It has been shedding its costly bulk deposits; however this still remains at elevated levels. Going forward it plans to focus on increasing its CASA base by adding branches and also focus on NPA recovery efforts and keeping gross NPAs below 2%. It also plans to open branches in rural areas to be able to meet its priority sector lending targets which are still below mandated levels.

Movers and shakers during the week

Company	3-May-13	11-May-13	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
MMTC	214	265	23.6%	890/193
Berger Paints	196	231	17.9%	225/120
Muthoot Finance	134	157	16.8%	246/106
Pidilite Industries	248	287	15.8%	287/154
Essar Oil	75	86	15.4%	96/46
Top losers during the week (BSE-A Group)
Opto Circuits	59	54	-8.5%	181/43
Jubilant Foodworks	1,120	1,032	-7.9%	1397/989
Multi Commodity	993	929	-6.4%	1617/830
Allahabad Bank	132	124	-5.6%	191/117
Idea Cellular	135	127	-5.4%	137/73

Data Source: Equitymaster
Public sector lender Union Bank of India has announced its financial results for the quarter ended March 2013. The bank's net profits during the quarter rose marginally by 2.1% year-on-year (YoY) from Rs 7.7 bn in 4QFY12 to Rs 7.9 bn in 4QFY13. Net interest income was higher by 8.7% YoY to Rs 19.8 bn. Net interest margin (on earning assets) stood at 2.89% in 4QFY13 as against 3.16% in 4QFY12. Non-interest income rose by 7.9% YoY to Rs 8.8 bn. The return on average assets during the quarter stood at 1.08% as against 1.31% in 4QFY12. Cost to income ratio was higher at nearly 41% as against 39.3% in 4QFY12.

Among other corporate news, the government is looking to launch a Rs 200 bn share sale by divesting 10% equity in Coal India, which would single-handedly meet half of this year's disinvestment target and is expected to be complete by September 2013. An inter-ministerial group (IMG) of secretaries would meet on Wednesday to finalise the terms for appointment of merchant bankers and legal advisors. The government is going to appoint intermediaries by this month-end and expects to complete the sale process by September. The government is looking at divesting a small part of the 10% stake through buyback of shares, in case Coal India initiates the process. Under the existing buyback norms, a company can buy back shares equivalent to 25% of its own net worth on a standalone basis. In case Coal India opts for a buyback, it can only do so up to Rs 45bn, which would be enough to purchase a tad over 2% of its equity.

State-owned power generator National Thermal Power Corporation (NTPC) plans to spend around Rs 96 bn to revive its old power plants, which might help revive the ailing power equipment sector as well. The objective is to improve the falling plant load factors (PLFs) of seven power plants that are more than 25 years old. The total capacity of these plants is around 5,000 Megawatts. While coal related worries have made many power companies freeze their expansion plans, NTPC is best placed to order equipment as they have already signed power purchase agreements, and has the maximum number of cleared projects.

Passenger car sales declined for the sixth straight month in April 2013 as a slowdown in the economy, firm interest rates and weak consumer sentiment took its toll. According to the data released by the Society of Indian Automobile Manufacturers (SIAM), domestic passenger car sales declined 10.4% to 150,789 units in April this year compared with 168,354 units in the same month of 2012. This has been the longest stretch of decline since the SIAM started collating data in 1997-1998. SIAM expects the decline in sales to continue for the next two months and expects some growth thereafter on account of the cut in petrol prices. New product launches are also expected to bolster sales in the coming months. As far as other auto segments are concerned, motorcycle sales in April declined by around 2%, while domestic scooter sales grew by a decent 14.7%. Total two wheeler sales grew by a mere 1% during April 2013.

The uptrend in the global stock markets continued in the week gone by as positive US jobs report mitigated slowdown fears. Even the Indian markets have performed well on robust financial performance being reported.