European crises cloud over global markets

Sat, 10 Sep RoundUp

   Previous Close   

Global stock markets plummeted this week on account of rising concerns about the debt crisis in Europe. It is being said that the crisis in Europe is similar to the 2008 crisis that engulfed the US and along with it the entire global economy. Greece in particular is facing recessionary conditions. The speech of the Greek Prime Minister regarding economic policy and the G7 meeting will be the ones to watch out for going into the next week. Barack Obama's announcement of US$ 447 bn plan to boost employment did not help matters either and the US markets saw their sixth weekly decline in the last 7 weeks.

Indian stock markets managed to stay afloat and notched marginal gains of 0.3% during the week. Heavy buying was witnessed in consumer oriented sectors. The world markets fell but in varying proportions. Germany (down 6.3%) and France (down 5.5%) were the top losers. However, Singapore (down 0.6%) and Brazil (down 1.3%) were able to minimize their losses.

Source: Yahoo Finance

Moving on to the performance of sectoral indices, Consumer Durables (up 5%) and Capital Goods (up 3.4%) saw the maximum gains. IT stocks were down on disappointment resulting from Obama's employment creation plan and possibilities of further financial problems in the US. Metals too were down by 1%.

Source: BSE

Now, let's take a look at key economic developments during the week. Corporate India saw merger and acquisition (M&A) deals worth US$ 2.1 bn in August. This makes it a total value of US$ 30.5 bn for the year so far. As per Grant Thornton, the M&A activity has increased over the past 2 months. There were 49 M&A deals this August as compared to 42 deals in the same period a year ago. Telecom accounted for the maximum deal value. This was mainly on account of Piramal Healthcare's stake acquisition in Vodafone-Essar.

In other news from the corporate world, Coal India wants to develop 18 new mines having reserves of approximately 1.6 bn tonne of high quality coking and thermal coal. However, this plan is set to get delayed because of regulatory issues. The company had floated tenders but could not get any response because of strict conditions on developing mines. It is now thinking of floating another tender with relaxed conditions. In case this too does not work out, then the company might think of opening a global tender for its abandoned mines. The abandoned mines include 6 of Eastern coalfields, 8 of Bharat Coking Coal and 4 of Central coalfields mines.

Pharma major Wockhardt has to clear its dues to bondholders, filing which the Bombay High Court might take over the company. As per the Justice D K Deshmukh, the pharma company needs to honour a payment of Rs 4.73 bn and the matter is scheduled for hearing on September 21, 2011. As per the court, Wockhardt can consider selling of its assets to make the necessary payment, however it will have to declare a date of repayment of entire dues. Earlier, the bondholders had filed a petition stating that Wockhardt went for a corporate debt restructuring because of its inability to pay the dues. The pharmaceutical company is considering selling its nutrition business to Danone to meet the dues.

In the banking world, Axis Bank's acquisition of Enam's stock broking and investment banking business last November is facing some hurdles from the Reserve Bank of India. As per the RBI's directives it has to be an all-cash deal and not a stock deal as proposed by Axis earlier. The deal was announced as an all stock deal worth Rs 20.67 bn last year. Axis wanted to issues stocks to Enam's founders while the bank's subsidiary would take over the operations of the business. RBI has rejected this stating that these are two different entities and such a deal will act as a precedent for other smaller banks wanting to acquire stake in brokerages.

Tata Power's flagship Ultra Mega Power Project (UMPP) at Mundra in Gujarat is facing problems of higher imported coal prices. This is a result of changed mining laws by the Indonesian government. Some part of the increase in costs will be compensated by higher coal realizations from its coal mines in Indonesia. The Gujarat government is not willing to pay the higher costs. It had earlier agreed to buy 2,000 megawatt from there. The project will be fully commissioned by 2012-13. With the new policy, the fuel costs are expected to increase by about US$ 30-40 per tonne. Tata Power could be in trouble if it is not able to pass on the higher costs.

Movers and shakers during the week

Company	2-Sep-11	9-Sep-11	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
GTL Ltd	51	70	38.2%	440/49
IVRCL Ltd	35	45	25.7%	174/33
NCC Ltd	55	66	20.7%	172/53
Jubilant Life Sciences	190	222	17.1%	363/149
IRB Infra	146	166	13.6%	293/135
Top losers during the week (BSE-A Group)
Exide Industries	151	137	-9.4%	179/123
Tata Power	1,070	1,002	-6.4%	1440/1006
Allahabad Bank	180	170	-5.3%	267/171
Siemens	900	853	-5.3%	944/711
NTPC	172	163	-5.0%	220/162

Source: Equitymaster
The country's largest private sector bank ICICI Bank is gearing up to recruit 6,000 employees this fiscal. The bank's business is growing by 18-20% yearly and the bank is in an expansionary mood. It has been opening new branches and plans to continue doing the same. Thus, they need more manpower. ICICI Bank is looking at mainly recruiting people at the entry level either directly or through banking and insurance institutes that the bank has tie-ups with.