Stock markets cheer EU deal

Sat, 29 Oct RoundUp

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World markets heaved a sigh of relief post the European Union summit. The series of measures announced by European leaders regarding how to contain the Greece crisis and minimize its impact on other nations provided some hope to the fearful investors. The US markets were up by 3.6% during the week.

Indian stock markets were up by 6% during the week. Diwali celebrations continued on the Dalal Street till the end of the week. The week also saw the markets nearing their 3 month high. Indications from Reserve bank of India (RBI) about the end of monetary tightening cycle along with global cues uplifted investor mood. Amongst the other world markets, Hong Kong was the biggest gainer (up by 11%) followed closely by Brazil and Singapore.

Source: Yahoo Finance

Festive mood was visible across sectors this week. All sectors closed the week in the green except Consumer Durables (down by 1.1%). Metal (up by 9.4%) and Realty (up by 8.5%) stocks led the pack of gainers.

Source: BSE

Let us have a look at the economic developments during the week. The Reserve bank of India (RBI) hiked interest rates by 25 basis points. This is the 13th raise since March 2010. It may be recollected that in its bid to tame intolerably high levels of inflation, RBI has cumulatively increased rates by 525 basis points since. However, this time it has signaled the end of the monetary tightening cycle. The RBI has also revised downwards the GDP growth rate to 7.6% for the current fiscal.

The result season continued with companies like Pfizer, Imperial Tobacco Company (ITC) and Idea Cellular declaring their numbers for the quarter ended September 2011.

ITC declared results for the quarter ended September 30, 2011. The company's sales grew by 17.5% YoY. This was mainly on account of good performance form the FMCG (Fast Moving Consumer Goods) segment. Among FMCG, cigarettes grew by 16.4% YoY. The hotel business on the other side reported a dismal 1% growth YoY. Among the other segments, agri business revenues stood at Rs 14 bn while those from paper and packaging were Rs 10 bn. Operating margins were maintained around 36% levels for the quarter and around 35% for the half year period. Net profits grew by around 21% YoY.

Telecom company Idea Cellular reported numbers for the second quarter of the financial year 2011-12. The revenues grew by 26.1% YoY led by a good growth in total subscriber base along with the minutes of usage. The average revenue per user (ARPU) stood at about Rs 155 per month as compared to Rs 167 in the corresponding period last year. In the previous quarter ARPU was Rs 160. During the 2QFY12 , the average revenue per minute (ARPM) was 42.7 paise. The same was 41 paise in the same period last year. Operating margins grew slightly to 21.7% as against 19.6% in 2QFY11. The rise in margins is being attributed to lower network operating expenses as a percentage of sales. The management considers 3G to be the growth driver going forward.

Colgate is planning an investment of Rs 2 bn in the state of Gujarat. The company intends to set up a new production facility in an industrial estate in Sanand (near Ahmedabad). It may be noted that this estate is run by the Gujarat government's Gujarat Industrial Development Corporation. The FMCG company has existing manufacturing units in Maharashtra, Himachal Pradesh, Andhra Pradesh and Goa.

Movers and shakers during the week

Company	21-Oct-11	28-Oct-11	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
IVRCL	35	41	14.7%	158/33
Ashok Leyland	24	27	14.5%	40/23
JSW Steel	582	664	14.1%	1359/545
Rel. Infra	408	465	13.8%	1070/378
Sterlite Industries	117	133	13.3%	193/107
Top losers during the week (BSE-A Group)
Union Bank	252	222	-11.9%	391/211
Indian Bank	230	205	-10.7%	308/188
Indiabulls Fin. Services	170	157	-7.7%	240/138
Koutons Retail	23	21	-6.7%	108/19
Sun TV	271	254	-6.1%	550/221

Source: Equitymaster
State run power company National Thermal Power Corporation (NTPC) is likely to see some relief for its coal supplies. The coal ministry is looking at restoring its 5 captive coal block allotments that had been cancelled in May 2011. These 5 blocks have reserves equal to 3 bn tonnes. Thus, the restoring would enable NTPC to ramp up coal production to 47 m tonnes per annum. It may be noted that the power company aims to double the production capacity to 75,000 megawatt.

In news from the hospitality sector, Indian Hotels plans to set up its first luxury hotel in China next year. The hospitality company that runs Taj chain of hotels will be the first Indian hotel company to set foot in the Asian country. IHCL has other expansion plans also in mind. It aims to add around 13 hotels and 1,840 rooms in 2011-12. By 2014, the count is expected to rise to 142 hotels. More Vivanta hotels and Gateway hotels are also expected. The company is not only looking at the luxury segment for expanding, but intends to expand its Ginger range of hotels too. Ginger hotels are the low-budget hotels by Indian Hotels group.