Asian markets take the cake this week

Sat, 2 Jan RoundUp

   Previous Close   

Stockmarkets across the world continued to be in a celebration mood as majority of them ended the week on a positive note. While the Indian markets were not amongst the top gainers this week, they did manage to end on a positive note. India's benchmark index, BSE-Sensex closed with a gain of 0.6%. Last week, the Sensex was amongst the top gainers (with a gain of about 3.8%).

Coming to global markets, as you can see from the following chart, Asian markets took the cake this week. Recording a gain of 4.3%, China topped the list. Singapore and Hong Kong followed as these markets ended higher by about 2% each. Gains in China were on the back of the country raising its economic growth figures. It raised its 2008 GDP growth estimate to 9.6% from the earlier estimate of 9%. In addition, Chinese policymakers believe that the country's 2009 quarterly figures will also have to be upgraded. Japan also announced an increase in its industrial production figures this week. Amongst the key losing markets, the US and Germany topped the charts. While the US markets ended lower by about 1%, Germany closed with marginal losses.

Source: Yahoo Finance

Coming to the performance of BSE indices, most ended the week on a positive note. Stocks from the consumer durables sector led the pack of gainers, as the BSE-Consumer Durables Index ended higher by 3.6%. It was followed by stocks from the power and auto spaces. While the BSE-Power index ended the week higher by almost 2%, the BSE-Auto Index closed 1% up. Amongst the key underperformers this week were stocks from the realty, IT, and metal sectors. Stocks from the smallcap and midcap spaces were in limelight this week, as the BSE-Smallcap Index and the BSE-Midcap Index recorded gains of 3% and 1% respectively.

Source: BSE

Moving on to the key corporate developments of the week, auto companies announced their sales numbers for the month of December. Hero Honda announced a whopping 74% YoY growth in motorcycle sales during the month. This is the highest growth figure for the company in the year till date. TVS Motor also announced its sales numbers for the month of December 2009. The company clocked a 42% YoY increase in sales of scooters and motorcycles. It must be noted this is despite a marginal 2% YoY growth in exports, which form about 17% of total volumes (for the month of December 2009).

Moving on to sales volumes of four-wheeler manufacturers. Maruti Suzuki announced a 51% YoY jump in volumes during the month. Exports during the month grew by 223%. With this, the contribution of exports to total volumes stood at 16% as compared to 8% during December 2008. M&M, on the other hand, reported a whopping 122% YoY increase in its December auto sales.

During the week, the management of TCS shared its take on the industry outlook for the year 2010. Its top management hinted that it is seeing a significant pickup in IT demand as clients are re-opening and in many cases increasing their IT budgets, which saw a standstill around same time last year. The banking and financial services sector which has been a top spender for IT was beaten out of shape during the financial crisis. However, in a turnaround, it has become a lot more promising on account of a spurt of mergers and acquisitions happening there. IT spend is expected to increase on account of cost improvement initiatives and growth opportunities that the clients are seeking. TCS' top guns believe that growth in 2010 will primarily be volume driven i.e. more amount of outsourcing will be done.

During the week, a leading business daily reported that Indian steel makers like Tata Steel and SAIL are expecting prices to rises in 2010. This would be on account of improved economic activity, gradually leading to pickup in demand. It may be noted that Tata Steel increased its steel prices by Rs 2,000 per tonne last week. Steel Authority of India (SAIL) withdrew its Rs 750-1,500 a tonne rebate it offered since November 2009. In addition, an increase in raw material cost has also triggered this price hike. The price of the primary raw materials like coking coal and iron ore are expected to jump by 20-30% in 2010 as compared to their cost in 2009.

This coupled with a significant demand recovery in the US and China is expected to boost steel price. Domestic demand is also on an upswing on back of a number of infrastructure projects being undertaken. We believe that this bodes well for the Indian steel makers which went through a slack period during early this year on account of simultaneous recession in the US, Europe and Japan.

Movers and shakers during the week

Company	24-Dec-09	31-Dec-09	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
Central Bank	146	167	14.7%	179 / 30
Apollo Hospitals	577	656	13.6%	694 / 350
Fortis Healthcare	122	137	11.9%	138 / 62
Indian Hotel	94	102	8.5%	104 / 34
Mahindra Finance	317	340	7.6%	353 / 175
Top losers during the week (BSE-A Group)
Idea Cellular	63	58	-7.6%	92 / 41
GTL Infra	38	35	-7.1%	50 / 28
Oriental Bank	267	250	-6.2%	296 / 95
Dr. Reddy's	1,207	1,144	-5.2%	1,242 / 357
GVK Power & Infra	49	47	-5.0%	54 / 17

Source: Equitymaster
Coming to key economic news of the week, food inflation soared to 19.83% for week ended 19th December 2009. This was on the back of rising prices of key items like pulses and potatoes. Moreover, drought coupled with a global recovery resulting in growth in demand is pushing up the prices of food commodities. However, this inflation comes off from a low base as the food inflation for the same period last year was low. Nevertheless, the government is worried. This is due to a spillover effect from this food inflation affecting other segments. The Reserve Bank of India (RBI) has already hinted at the reversal of the expansionary monetary policy. The bank is in fact expected to start raising the repo rates, which currently stands at 3.25%, early this year. While this would not affect food inflation, it is expected to curtail spillover inflation. One should watch the Rabi crop numbers closely to ascertain what 2010 will bring to the dinner table.

After staying in the red for a period of 13 months, Indian exports have managed to turn positive during the month of November. The value of exports in November 2009 stood at US$ 13.2 bn as compared to US$ 11.2 bn in November 2008, translating as an increase of 18% YoY. The reason cited for the improvement in exports are various – low base effect, the changing global economy and the positive impact of the stimulus extended by the government. Exports during the period April to November are lower by 22.3% YoY as compared to the same period last year. Trade deficit for April-November 2009 stood at US$ 66.2 bn, lower than US$ 100.2 bn in the same period in 2008.

Imports of goods and services, however, remained in negative territory during this period. Although the contraction in imports was at a much lower pace of about 3% as compared to 15% during the previous month. As per official data, oil imports increased by about 7% to US$ 6.4 bn during the month of November. It must be noted that is also the first time in a period of thirteen months. Imports during period between April to November 2009 stood at US$ 50.2 bn, which is lower by about 34.4% as compared to the corresponding period last year. During the month of November 2009, non-oil imports contracted by 5.9% YoY, while during the period April to November the figure was lower by about 24% YoY.