There are more things to alarm us than to harm us, and we suffer more often in apprehension than reality.”
Market's worst fears have turned out to be a case of false alarm. We are of course talking about the GDP numbers, which came in ahead expectations. At 9%, the FY08 GDP growth beat all optimistic forecasts. That too when most were expecting a contraction due to a slowdown in industrial activity. An improved show by the farm sector helped as did the continued momentum in services. For the current fiscal year, expectations are for 8-8.5% GDP growth. This is pretty good considering the fact that it will come on top of the high base of last year. What's more, the strong growth momentum underscores India's long-term macro-economic fundamentals amid a slew of headwinds and a slowing global economy. So, in that sense, the bulls should be happy.
Of course, ground reality remains that rising inflation is reducing the weight of wallets across the board. Inflation has the potential to touch double-digits in a few week's time. If inflation does spiral out of control, the RBI will have no choice but to resort to some tightening measures. The RBI may even hike the repo rate, which may not please India Inc and the bulls.
For the day, we expect the market to open on a cautious to flat note as most global markets are sluggish. Thereafter, the trend will turn sideways and rangebound. With the GDP data out of the way, the focus will be on crude oil prices and whether the Government manages to bite the bullet and increase retail fuel prices.
Hexaware will be in action depending on what announcement they make. Sterlite Industries will be action after it announced acquisition of US copper mining company Asarco for $2.6bn. Airline companies will attract attention as oil PSUs have hiked ATF prices by a whopping 18%. Hero Honda and Bajaj Auto may rise as they have reported good monthly sales volume for May.
US technology stocks rallied for the fourth session in a row on Friday, on Dell's improved earnings. But the broader market struggled amid rising oil and gas prices, and a mix of economic news that did little to temper fears about a slowdown.
The Dow Jones Industrial Average fell 7 points to end at 12,638, leaving the blue-chip index with a weekly gain of 1.2%. The S&P 500 index added 2 points to 1,400 but fell 1.8% on the week. The technology-laden Nasdaq advanced 14 points to 2,522, giving it a weekly advance of 3.2%.
The Dow industrials fell 1.1% for the month of May, the broad S&P 500 still rose 1.1%. The Nasdaq jumped 4.6%.
US stocks were mostly up last week as the dollar firmed up and oil prices backed off. A report showed first-quarter GDP growth was better than initially reported, while Friday's economic news was mixed.
Reports showed an increase in personal income, in-line inflation, weaker consumer sentiment and continued weakness in manufacturing.
The range-bound trading in the US is not likely to change soon. Monday, the first trading day of June, brings economic reports on construction spending and manufacturing. No market-moving earnings reports are due though.
Wall Street will most likely remain cautious ahead of Friday's jobs data. But, there will be some market-moving data on manufacturing on Monday, and one can get an early peak into jobs from the private sector report on Wednesday.
Personal income rose 0.2% in April, the government said, matching forecasts. Personal spending rose 0.2%, also as expected. Core PCE, the report's closely watched inflation measure, gained 0.1% as expected.
Chicago PMI, a regional read on manufacturing, rose to 49.1, edging expectations. However, any reading below 50 shows continued weakness in the sector. The University of Michigan's May consumer sentiment index was revised higher to 59.8 from an initial reading of 59.5. The index stood at 62.6 in April.
US light crude oil for July delivery rose 73 cents to settle at $127.35 a barrel on the New York Mercantile Exchange, offsetting early gains. On Thursday, oil prices had slipped more than $4 a barrel.
The national average price for a gallon of regular unleaded gas rose to a record $3.962 from the previous day's record of $3.952, AAA reported.
Treasury prices rose, lowering the yield on the 10-year note to 4.05% from 4.07%. The dollar fell versus the euro and gained versus the yen. Gold prices rose, bouncing back after several down days. COMEX gold for August delivery rose $9.80 to settle at $891.50 an ounce.
Dell reported higher quarterly sales and earnings late Thursday that topped estimates thanks to cost cutting, notebook sales and growth in markets overseas. Shares gained 5.7%.
United Airlines and US Airways formally abandoned plans to merge - a combination that would have created the world's largest airline, but also would have limited routes and boosted ticket prices. Shares of United parent company UAL rose modestly, while US Airways stock lost 8.3%.
European shares ended the last trading day of the month on an upbeat note. The pan-European Dow Jones Stoxx 600 index extended its winning streak to four sessions, up 0.4% to 322.09. For the week, the index has climbed 1% but is still showing a slight loss for the month after closing at 323.09 on April 30.
Germany's DAX 30 advanced 0.6% to 7,096.79 while the French CAC-40 climbed 0.8% to 5,014.28. The UK's FTSE 100 closed down 0.2% at 6,053.50.
Bulls look to carry momentum
For the second consecutive day it was a highly volatile session. However, on Friday it was the bulls that took charge in the second half of the day led by gains in the Capital Goods, IT and the Pharma stocks.
After an early bounce back bulls were unable to hold on to their gains as traders turned cautious ahead of the Economic data to be released during the day. GDP numbers which were released failed to cheer the bulls. Even the Inflation figures barely had any impact on the market sentiment.
India’s Economy grew 8.8% in Jan-March quarter from year ago beating market expectations. Analyst had expected GDP at 8.1%. The country’s farm out-put grew 2.9%, mining grew 5.9% and electricity grew 5.6%. India’s trade, hotels and transport grew 12.4% in quarter to March.
Finally, the BSE benchmark Sensex ended 99 points higher to close at 16,415 and the Nifty index gained 34 points to close at 4,870.
India’s Inflation accelerated to 8.1%, highest in 3 ½ years. The Wholesale Price index climbed further in the third week of May even as the government grapples with high crude oil prices and its adverse impact on public sector oil marketing companies.
Among the BSE Sectoral indices, the BSE Power, Realty and Oil & Gas fell over 1.5% each. On the other hand, Capital Goods, IT and the Pharma index added over 1.5% each. Among the broader indices, the Mid-Cap index was up 0.3% while, the Small-Cap index was down 0.6%.
Overall about 1,013 stocks advanced; 1,692 stocks declined while 61 stocks remained unchanged. Among the 50-Nifty 29 stocks ended in green and 21 stocks ended in red.
Ranbaxy gained by over 4.5% to Rs528 after reports stated that Orchid Chemicals would convert business alliance with Ranbaxy into an agreement next month. There were also reports stating that Ranbaxy has tied up with PVR Cinemas to give free samples of its best selling energy pill Revital. The scrip touched an intra-day high of Rs534 and a low of Rs506 and recorded volumes of over 10,00,000 shares on NSE.
Cadila advanced by 1.6% to Rs295 after the company announced its foray into Spain with the acquisition of 100% stake in Laboratories Combix. Combix which has a pure generics focus provides the right fit for Zydus' entry strategy into a market that is estimated at $1.7bn and is growing at 21.5% compared to 6% for the overall pharmaceutical market in 2007.
The Spanish pharmaceutical market is the 5th largest in Europe. Established in 2006, Combix with a sales and marketing focus has a solid portfolio covering 17 molecules.
Additionally, it has a range of products that are pending launch or in the pipeline. The acquisition allows Zydus to jumpstart its business and leverage strengths in product development, a high quality, cost-competitive supply chain and operational efficiency. The scrip has touched an intra-day high of Rs300 and a low of Rs292.
L&T extended previous day’s momentum as the stock further surged by over 3% to Rs2981 after the company on Thursday announced issues 1:1 bonus to equity shareholders. There were also reports stating that the company schedules first of three IPOs for 2009-10. The scrip touched an intra-day high of Rs3045 and a low of Rs2915 and recorded volumes of over 700,000 shares on NSE.
Aegis Logistics lost early gains and slipped down by 1.5% to end at Rs238. The company’s results for FY08 showed Rs38.9mn, revenue up 62%. Logistics business revenue was up by 40% and Gas revenue was up by 68%.Growth in Gas revenues was partly due to increase in International gas prices apart from increase in volumes by 33%. Overall net profit of the group increased to Rs380mn with a rise of 78%.
The Company plans further expansion by setting up additional capacities in Logistic Sector and by continuing its rollout plan of Autogas Stations in Gas Business. The scrip touched an intra-day high of Rs262 and a low of Rs237 and recorded volumes of over 18,000 shares on NSE.
Sobha Developers gained by over 2.5% to Rs498 after the company said that it posted a net profit of Rs702mn for the quarter ended March 31, 2008 as compared to Rs620mn for the quarter ended March 31, 2007. The total Income has increased from Rs3589mn for the quarter ended March 31, 2007 to Rs4765mn for the quarter ended March 31, 2008.The scrip touched an intra-day high of Rs511 and a low of Rs485 and recorded volumes of over 1,00,000 shares on NSE.
Karuturi Global ended flat at Rs26. Reports stated that the company said that they would raise US$250mn for agriculture project in Ethopia. The scrip touched an intra-day high of Rs27 and a low of Rs26 and recorded volumes of over 12,00,000 shares on NSE.
Exide Industries was up by 1% to Rs74, the company said that it has planned to acquire lead smelter company for Rs350mn. The scrip touched an intra-day high of Rs75 and a low of Rs73 and recorded volumes of over 56,000 shares on NSE.
Videocon Industries slightly slipped by 1.5% to Rs350. The company said that it is planning to set up a 1,000MW hydropower project in Uttaranchal with an investment of Rs60bn, reports stated. The scrip touched an intra-day high of Rs368 and a low of Rs289 and recorded volumes of over 2,00,000 shares on NSE.
Recently listed Piramal Life lost ground and slipped by over 6% to Rs294. According to reports, the company said that it would invest Rs2bn per anum for next 2-3 years on R&D. The scrip touched an intra-day high of Rs329 and a low of Rs269 and recorded volumes of over 58,00,000 shares on NSE.
Jubilant Organosys marginally slipped by half a percent to Rs349. Reports stated that the company completed the acquisition of Canadian based Draxis Speciality Pharmaceuticals for US$253mn. The scrip touched an intra-day high of Rs359 and a low of Rs349 and recorded volumes of over 1,000 shares on NSE.
Corporate News
Sterlite Industries to buy operating assets of Asarco, a US based mining, smelting and refining firm for US$2.6bn. (BL)
Essar Oil bids for an offshore block in Australia; in talks with foreign companies to explore for oil in Egypt and Yemen. (BS)
Emaar MGF plans to develop 31mn sq.ft of commercial, residential, SEZs and hospitality spaces in South India at an investment of Rs125bn.(FE)
HDFC Venture has picked up 49% stake in two subsidiaries of Godrej Properties, the real estate arm of Godrej group.(BS)
Government asks NTPC to resolve all its disputes with foreign vendors.(ET)
JSW Steel to invest US$500mn over next three years to expand capacity of iron ore mines acquired in Chile.(BL)
L&T plans to invest Rs25bn in the current fiscal to augment capacities at its growth centers.(DNA)
Bajaj Auto posts 7.6% growth in motorcycles sales in May; Hero Honda motorcycles sales growth rises 9.5%.(BS)
Tata Steel to raise its Jamshedpur plant capacity to 10mn tons pa by 2010.(BL)
M&M defers its plan to build a Rs4bn tractor facility in Chennai.(BS)
Apollo Gleneagles to invest Rs14bn in the next two years to set up 2,000 more beds.(BL)
Alstom Power is likely to enter into a US$500mn JV with Bharat Forge.(ET)
BSNL may go for a listing as trade unions likely to respond positively to the government’s call in this regard.(TOI)
Godrej Properties files a draft prospectus for its IPO; estimated to raise up to Rs6bn.(FE)
Air India announces hike in fare prices as ATF prices go up.(Mint)
Essar Oil to raise fresh debt of up to US$5bn through ECB.(BL)
Rashtriya Ispat Nigam is mulling a merger with NMDC.(BL)
Emami group acquires 27.5% stake in Zandu Pharmaceutical.(TOI)
Satyam Computers takes on lease 0.4mn sq ft of office space in Chennai SEZ.(BL)
UB Group in talks with France based EADS Socata to invest US$200mn to co-develop business for jets.(DNA)
BPCL may improve capacity utilization after merger with IOC. (BL)
L&T on look out for a JV with Indian Railways to manufacture equipment for the railways.(ET)
Elder Pharmaceuticals to invest Rs250mn in API space.(DNA)
Times of India group buys UK based Virgin Radio for Rs4.5bn.(TOI)
Genpact, EXL Services may buy a major stake in Infovision.(ET)
Sun Pharma to file 30 ANDAs in FY09.(DNA)
MRTPC issues notification to Dish TV over misleading advertisement of its free set-top box offer.(TOI)
DHL is planning to make an offer to shareholders of Blue Dart.(ET)
Mercator Lines renews a vessel charter to ArcelorMittal for two more years.(BL)
WNS Holdings emerges as the highest bidder for Aviva’s BPO operations with an offer of US$200mn.(ET)
Economic News
Fiscal deficit touches Rs329bn for April; constitutes 24.7% of the fiscal 2009 target.(FE)
Government allowssoftware developers, hotels and hospitals to raise up to US$100mn for import of capital goods.(ET) Government is believed to have decided to impose 15% export duty on iron ore.(TOI)
Air fares to go up with the government announcing an 18.5% average increase in ATF prices.(FE)
India turns into a net importer of steel with imports of 7mn tons in 2007-08.(BS)
Committee of Secretaries decides to remove export duty on most steel products.(DNA)
JNPT to invest Rs70bn in an up gradation drive.(ET)
Kerala and West Bengal government may reduce sales tax on petrol and diesel.(BS)
Department of Post in talks with Deutsche Postbank to enter into housing loan business.(FE)
Government to consider uniform state laws for liquor.(BS)
Finance ministry turns down a proposal from DIPP to give 35% abatement on excise duty to cement manufacturers.(ET)
Government announces 1% reduction in central sales tax.(FE)
RBI issues new draft norms to review current stipulations to minutely monitor off-balance sheet exposures of banks.(ET)
GoM to take a call on whether foreign and domestic companies can participate in the auction for 3G spectrum.(FE)
Indian shipping firms would meet a global deadline to phase out all single-hull tankers by 2010.(BL)