Global markets remain volatile

Sat, 19 Sep RoundUp

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Global stock markets remained volatile throughout the week but heaved a sigh of relief after the US Fed decided to play safe again and put rate hike on hold. The decision was on the back of concerns of a fragile global economic climate and low inflation rates in the US. The Fed has said that it wanted the US inflation to reach 2% before it starts the monetary tightening exercise. Fed Chair Janet Yellen signaled that the rate may still be raised this year. The Fed will meet again in October and December this year. Stock markets around the world ended mostly in red. India, Hong Kong and Brazil were the only gainers for the week.

All the European markets ended the week on a slippery wicket. Among Asian indices, only Hong Kong and India ended the week in the positive zone. The Japanese index was down by 1.1% as exporters were hurt by a stronger yen. The uncertainty surrounding the Chinese markets weighed on its indices, which were down by 3.2% for the week.

Back home, the Indian markets were marred by volatility throughout the week. But the Fed’s decision to keep rates unchanged helped perk up the markets towards the end and the index closed the week with a gain of 2.4%.

Key world markets during the week
Among the sectoral indices, stocks from the banking and power sector were the top gainers, while consumer durable and capital goods stocks closed in the red.

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

In a bid to revitalize the country's power sector and deliver on its promise of electricity to all, the government is considering a plan to freeze the non-performing debt of state distribution companies. This will give the companies a fresh lease on life. Further, the move will also help banks, which have extended loans to the tune of Rs 530 billion to state government-run distribution companies (discoms). To repay the past dues, part of the higher transfers to the state’s mandate by the 14th Finance Commission could be used.

To help cash-strapped state power distribution companies, the government will financially support them in buying electricity. Under the plan, 18 power plants have emerged as successful bidders in the reverse e-auction to receive Rs 17.8 billion subsidy for buying imported liquefied natural (LNG) gas. The offered subsidy is a move that will help revive a cumulative generation capacity of 11,717.72 megawatts (MW).

The government raised import duty on crude and refined edible oils by 5% in a bid to protect farmers' interest and provide a level playing field to domestic oil refiners. But the Solvent Extractors Association (SEA) has said that the marginal increase in import duty of edible oils was not adequate to curb cheap imports, and will not benefit farmers and local refiners to a great extent.

Movers and shakers during the week

Company	11-Sep-15	18-Sep-15	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Oberoi Realty	231	251	11.8%	334/203
Adani Enterprise	69	78	11.8%	804/66
Bata India	1,027	1,139	10.9%	1,495/942
Future Retail	109	119	9.2%	152/81
Crompton Geaves	167	181	8.3%	221/153
Top losers during the week (BSE-A Group)
Emami	1,129	1,093	-10.3%	1,368/668
Bharat Forge	1,028	924	-10.1%	1,363/713
Mcleod Russel	165	155	-6.2%	315/144
Videocon Industries	143	136	-5.2%	200/115
Container Corp.	1,483	1,407	-5.1%	1,944/1,204

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

UltraTech Cement received environmental clearance to expand its capacity at Awarpur plant in Maharashtra at an investment of Rs 2.4 billion. For this, the company has proposed to raise production of clinker, a raw material for cement manufacture, to 4.5 million tonnes per annum (MTPA) from the existing 3.3 MTPA. The company has been asked to comply with specific conditions, such as developing green belt over 33% of the total project area, installing air monitoring devices, and continuous stack monitoring of facilities to monitor gaseous emissions.

With an aim to give impetus to solar and renewable energy in the country, ABB India has won orders worth around Rs 1.2 billion (US$18 million) to provide plant electrification, automation, and substation solutions for solar power plants. These projects will connect more than 850 megawatts (MW) of solar energy to the grid and will be among the biggest solar projects worldwide. The most significant of these projects, placed by the Adani Group, is the 648 MW solar plant in Kamuthi, Tamil Nadu. The company will provide a turnkey solution encompassing the design, supply, installation, and commissioning of the power plant electrification and automation systems, the pooling stations and multiple substations. This includes two 230 kilovolt (kV) and three 110 kV substations to connect the electricity generated to the local grid.

Tata Motors-owned Jaguar Land Rover (JLR) has entered the sports utility vehicle (SUV) segment with the launch of F-Pace model. The SUV is expected to hit the Indian market in the second half of 2016. It will enter the European and the US markets in a phased rollout by early next year. The cars will be produced at JLR's 500 million pound Solihull factory in the UK using new architecture, which is more aluminum based.

TVS Motor Company has signed a memorandum of understanding (MoU) with the government of Tamil Nadu for investing Rs 3.5 billion in its existing two and three-wheeler plants in Hosur during the next three years. The investment is said to be mainly for the development of new products and for capacity expansion. TVS Motor Company is the third largest two-wheeler manufacturer in India and among the top ten in the world.

Leading mid-tier software company Mindtree, has entered into partnership with Dubai-based 'flydubai' to shape the full digital experience of travelers to Dubai. Mindtree will focus on transforming flydubai's information technology back end including electronic ticketing and real-time baggage tracking. Moreover, the agreement will also extend to other strategic business areas such as revenue management, target monitoring and improving operational efficiencies.

With the US Fed holding interest rates for now, the short term volatility has abated. However, going ahead, the movement in global markets will closely follow the developments on this front. Back home, the fourth bi-monthly monetary policy review on 29th September will set the tone for the markets. However, investors should not get carried away by these short term fluctuations but rather focus on fundamentals when investing in stocks.