Major global markets close on weak note

Sat, 25 Jul RoundUp

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Barring stock market in China (up 2.8%), major global markets ended the week on a negative note. The stock markets in Brazil (down 7.2%) and UK (3.1%) were the major losers in the week gone by.

The stock markets in US witnessed intense selling, resulting in biggest weekly losses since March.  The talks of Greece bailout continued to get delayed. Major European stocks too closed weak. However China stock markets were able to register third weekly gain in a row.

Concerns over economic growth  remain the key driver for the poor performance in the global markets. Further, sharp correction in various commodity prices impacted various stocks in such sector. Over and above, corporate earnings so far have not been very encouraging for most of the countries. 

In the commodity basket, the yellow metal had a tough week. A combination of a strong US dollar and alarming interest rate rises prompted a 'flash crash' in the gold price in the beginning of the week. Gold prices were down by 5.4% in the week gone by.

Back home, the global pessimism gripped the stock markets. The BSE Sensex was down by 1.2% for the week gone by. Even the results have been a mixed bag so far for the Indian corporates. The first week of parliament proceedings has been quite disappointing. The continued logjam in parliament also impacted the Indian indices.

Key world markets during the week

Source: Yahoo Finance

Among the sectoral indices, the stocks from IT sector were maximum in demand. The Pharma and Realty stocks were under pressure and witnessed maximum selling. However, the stocks from small cap and mid cap were in demand during the week gone by.

BSE indices during the week

Source: BSE

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

As reported in a financially daily, the committee appointed by the Government of India is into discussion regarding taking away the veto power of the Reserve Bank of India. The committee was appointed by the previous United Progressive Alliance government and the incumbent one had common ground with the RBI governor on veto power. Reportedly, the decisions in a meeting of the monetary policy committee must be taken by a majority vote of the members present and voting as per the revised draft said. This is a departure from the earlier draft that had proposed entrusting the power to the governor in case of a conflict with the majority view.

Movers and shakers during the week

Company	17-Jul-15	24-Jul-15	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Infosys Ltd	1,002	1,089	8.7%	1168/827
Aditya Birla Nuvo	1,947	2,111	8.4%	2155/1358
Gitanjali Gems	40	43	7.5%	77/37
Ashok Leyland	75	81	7.5%	83/31
MRF Ltd	36,229	38,275	5.6%	42799/23000
Top losers during the week (BSE-A Group)
Lupin Ltd	1,974	1,672	-15.3%	2112/1094
Sun Pharma	946	836	-11.7%	1201/743
Jaiprakash Asso	12	11	-11.8%	64/10
Container Corp	1,839	1,626	-11.6%	1944/1204
Unitech	8	7	-11.5%	28/7

Source: Equitymaster
Now let us move on to some of the key corporate developments of the week gone by.

Lupin Ltd is set to acquire Gavis Pharmaceutical -a US based company. As per a leading financial daily, it will pay around Rs 56.1 bn to buy out the company. The deal comes at a price which is nine times the sales. The purchase if concluded will be the biggest buyout of a foreign asset by an Indian pharma company after Dr Reddy's purchase of Germany's Betapharm in 2006. The deal could help Lupin expand its US presence, which contributes nearly half of Lupin's revenue.

Indian Hotels is aiming to open 14 new properties in India and abroad this year. This will be twice the inventory the company is set to open as compared to the last year, pushing its inventory to nearly 17,500 rooms with 145 properties as compared to 15,751 rooms with 131 hotels at present. Indian Hotels is also making efforts to bring down its overall debt levels in order to reduce the interest burden. US and European hotel owners have introduced a variety of brands, in order to cater to demand at every level. This has put pressure on every hotel operating abroad, including those belonging to Indian Hotels.

Bharti Airtel, India's largest telecom firm said that it has no plans to exit the Africa operations and would continue to invest in the region. The statement came a day after it entered into a pact with France Orange for selling its four subsidiaries. Airtel has operations in 17 markets in Africa. It has 8.73 m subscribers in Africa. The company stated that they remain fully committed to the Africa operations and they will continue to invest in its growth and building a profitable business and accordingly they have no plan to exit.

Now that the result season has begun, let us take a look at the interim performance of some of the companies.

India's third largest information technology (IT) services company Wipro Ltd has posted its financial numbers for the first quarter of 2015-16 which were largely in line with estimates. For the quarter ended June 2015 the company has posted a 4% rise in its net profit on a YoY basis. The revenue of the company witnessed a YoY rise of 10%. The company's IT services business that counts for a major chunk of its overall revenue grew by 10% YoY.

Bajaj Auto Ltd, has announced its numbers for the quarter ended June 2015. Net profit of the company jumped 37% for the quarter on a YoY basis. Net sales grew by 7% on a YoY basis while the absolute sales recorded a YoY increase of 2.5%.

Bharti Infratel has reported its results for the first quarter ended June 30, 2015. The company's sales have risen 6% YoY. The operating performance was better with operating profit up by 10% YoY. The net profit was up 24%.

Eicher Motors has reported its results for the second quarter ended June 30, 2015. The company has reported a 37.7% rise in its net profit on a YoY (year-on-year) basis. For the concerned period the company's total income has increased by 44.8% on a YoY basis. On the consolidated basis, the company has reported 40.9% YoY rise in its net profit after tax and minority interest.

There has been a lot of activity happening in global and domestic front.  The geo-political tensions are expected to fuel uncertainty across the world including the Indian markets. The domestic earnings season has been a mixed bag so far. The ongoing monsoon session of parliament will be key driver for the markets. Further, if the major bills (Land and GST) do not get passed in this session then the market may see further fall.  All such factors will have strong influence on the direction of the market. However for investors it makes more sense to look for stocks with strong fundamentals for the long term and not to get swayed away by short term blips in the stock market.