Global indices rebound after market rout

Sat, 29 Aug RoundUp

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The week gone by started on an extremely bearish note as the global markets got burned on Monday. China ignited the crash and flames quickly spread to indices around the world.

The first signal of the deep downturn came when China's government announced surprise currency devaluation a couple of weeks back. Then, in another sign of a slowdown in the Middle Kingdom, came weak manufacturing data. News that factory production had shrunk to a six-year low sent the financial markets into tailspin.

However, by the end of the week, the major global indices recovered some of the early-week losses. Positive US economic growth data and a rate cut in China cheered investor sentiment. Yet most indices in Asia finished the week in the red, stock markets in China, India and Hong Kong were the top losers. While the stock markets in US and Europe closed with gains. 

Back home, the Indian indices closed the week down 3.6% after registering a single-day fall of more than 6% on Monday. The US Federal Reserve, however, lifted investor sentiment with some positive comments indicating a September rate hike seem less compelling.

Key world markets during the week

Source: Yahoo Finance

Among the sectoral indices, stocks from capital goods and banking sector witnessed maximum selling in 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.

A tripartite agreement (TPA) between Reserve Bank of India (RBI), the Union government and the state governments, which provided comfort or guarantee to power generators against payment default by State Electricity Board (SEB) will lapse in October 2016. If SEBs defaulted in their payments to power generators, the states would risk a deduction from its annual transfers which they receive from the central or union government. National Thermal Power Company (NTPC) which has a 17% share of India's power generation capacity is lobbying the government to extend the agreements. According to NTPC, the central government has assured it of renewing the TPAs.

Movers and shakers during the week

Company	21-Aug-15	28-Aug-15	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
NMDC	93	101	8.2%	188/90
Future Retail	110	115	4.1%	152/81
Videocon Industries	1,134	1,225	8.1%	200/115
IOC	394	405	2.8%	465/307
Apollo Hospitals	1,303	1,337	2.6%	1480/1022
Top losers during the week (BSE-A Group)
Housing development infrastructure	72	60	-17.2%	143/57
Oriental Bank	160	133	-16.5%	344/125
Central Bank	81	67	-16.3%	121/58
Century textiles	664	556	-16.3%	795/458
Syndicate Bank	100	84	-15.2%	141/79

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

One of India's leading telecom operators, Bharti Airtel has bought 'Augere' a company that owns 4G spectrum in Madhya Pradesh and Chhattisgarh. Airtel has signed a definitive agreement to acquire 100% equity stake in Augere Wireless Broadband India Private Ltd at an undisclosed amount. The acquired company holds 20 MHz (megahertz) of broadband wireless access spectrum in the telecom circle of Madhya Pradesh and Chhattisgarh. The acquisition will give Bharti the right to use 2300 MHz spectrum in a total of nine circles. Reportedly, Airtel has spent Rs 1.3 bn m to buy Augere. Airtel has already rolled out its 4G services in more than 300 cities. As per an article in Livemint, the data market in Madhya Pradesh and Chhattisgarh is estimated to be valued around $ 200m.

Meanwhile, Eicher Motors is planning to expand its business in the Indonesian market. Reportedly, the company is likely to commence its retail operations in the coming months. The company has set up an exclusive dealership in partnership with PT Distributor Motor Indonesia which will sell the 'Royal Enfield' bikes. Indonesia is the third largest two-wheeler market in the world. The head of International Business of the company stated that they will build their presence from Jakarta and will expand to other cities depending on the response from the same. In 2014, Royal Enfield sold more than 3,00,000 motorcycles globally.

As per a leading financial daily, Larsen and Toubro's (L&T) subsidiary- L&T Construction has won orders worth Rs 15.6 bn under the Power and Transmission & Distribution Business in July and August 2015. Among these, a key order has been received from Tenaga Nasional Berhad (TNB) for the design, manufacture, supply, installation, testing and commissioning of a 500 KV double circuit transmission line in Malaysia. Further, L&T Oman LLC, a subsidiary of L&T in Oman, has bagged two major orders from Oman Electricity Transmission Company SAOG (OETC). On the domestic front, a major order has been received from Tamil Nadu Transmission Corporation (TANTRANSCO).

In the pharma space, Glenmark Pharmaceutical has proposed to launch 10-12 new products in the domestic market during the current financial year. The company has already launched 4 products so far. The company stated that it may also look at acquiring brands or companies aimed at strengthening its market share. The company earns a one-fourth of revenues from the domestic market and focuses mostly on dermatology and diabetes segment.

The geo-political tensions are expected to fuel uncertainty across the world and Indian markets too will continue to experience the fallout of this turmoil. We thus continue to reemphasize that investors should invest in stocks that are fundamentally sound for the long term. It would be wise for investors to keep some cash aside, so when the market crash and valuations look favorable one can put this money in fundamentally strong company.

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