Saturday, October 24, 2009
After witnessing a surge last week, Indian markets wrapped this week on a disappointing note shedding over 2%, as it failed to sustain the 17,000 mark during the week. Intense selling by foreign funds in frontline stocks amid discouraging global cues, rising inflation and mixed Q2 earnings pulled the sentiments down.
The 30 share index, Sensex declined 512.01 points, or 2.96%, to 16,810.81 in the week ended Oct. 23, 2009. On the other hand, the broad based NSE Nifty dropped 145.1 points, or 2.82%, to 4,997.05 in the same period.
Mid-cap stocks lost 97.59 points, or 1.48%, to 6,510.89 in the week. While small-cap shares gained 6.5 points, or 0.08%, to 7,673.50 during the week.
Major gainers over the week in the sectoral indices were IT that gained 3.63%, TECk 1.86%, FMCG rose 1.41%.
Oil & Gas dropped 6.14%, Capital Goods fell 5.75%, BSE Consumer Durables lost 4.12%, Realty declined 3.55%, and PSU went down 2.70% among major losers in the sectoral indices over the week.
Major gainers in 30-share index were Tata Consultancy Services (7.04%), Hindalco Industries (4.05%), Tata Power Company (3.24%), Infosys Technologies (3.21%), and ITC (3.03%) over the week.
On the other hand Grasim Industries (10.05%), Jaiprakash Associates (8.87%), Tata Motors (8.49%), Reliance Industries (7.64%), and Reliance Capital (7.29%) were the major losers in the Sensex over the week
Wholesale price index (WPI) inflation continued to increase at 1.21% for the week ended Oct. 10, 2009 as against 0.92% in the week ago.
Engineering and construction major, Larsen & Toubro (L&T) announced a rise of 26.12% in the net profit to Rs 5,804 million for the quarter ended Sep. 30, 2009 as against profit of Rs 4,602.60 million for the same fiscal last year. Total income of the company was at Rs 81,363.90 million, a rise of 3.54% over the prior year period.
Apollo Tyres, the flagship of Raunaq Singh group, announced a phenomenal rise in standalone net profit for the quarter ended September 2009. During the quarter, the profit of the company rose 13.11 times to Rs 1,021.09 million from Rs 77.90 million in the same quarter previous year.
NIIT Technologies, a leading global IT solutions organization today announced a drop of 12.40% in the net profit for the quarter ended Sep. 30, 2009. During the quarter, the company reported a consolidated profit of Rs 321 million as against profit of Rs 367 million for the quarter ended Sep 30, 2008.
Jaiprakash Associates reported a phenomenal rise in standalone net profit for the quarter ended September 2009. During the quarter, the profit of the company rose 4.28 times to Rs 8,701.90 million from Rs 2,031.30 million in the same quarter last year. Net sales for the quarter for the quarter surged 59.72% to Rs 18,888.50 million, while total income for the quarter jumped 48.64% to Rs 19,125.10 million, when compared with the prior year period.
Allahabad Bank today announced a phenomenal rise in standalone net profit for the quarter ended Sep. 2009. During the quarter, the profit of the company rose 8 times to Rs 3,335.91 million from Rs 416.83 million in the same quarter last year. Interest earned for the quarter rose 10.87% to Rs 20,466.91 million, while total income for the quarter rose 23.99% to Rs 24,515.17 million, when compared with the prior year period.
China’s economy expanded at the fastest pace in a year in the third quarter on the back of the government's massive stimulus spending and record bank lending. Gross domestic product (GDP) grew by 8.9% in the third quarter compared to the same period a year ago, according to data released by the National Bureau of Statistics. For the first nine months of 2009, GDP gained 7.7 percent from a year before. The increase was greater than the 7.9% expansion in the second quarter, and was broadly in line with estimates. A string of other economic data released this week added to growing speculation that Beijing could begin to unwind its unprecedented expansionary policies next year. But they will have to ensure that the withdrawal of record fiscal and monetary stimulus doesn't lead to a slowdown in the world’s third-biggest economy.
Urban fixed-asset investment rose 33.3% in the first three quarters, edging up from 33.0% growth in the first eight months of the year, the Statistics Bureau said. Industrial production in September rose 13.9% year on year, higher than expectations of a 13.3% rise and above August's 12.3% gain. For the first nine month of the year industrial production is up 8.7%. Data also showed that the consumer price index (CPI) fell for an eighth successive month in September from a year-earlier, by 0.8%, but this marked a slowing of deflation after August's 1.2% contraction. The producer price index (PPI) dropped 7.0% for the month, easing from a 7.9% fall in August.
Infosys co-founder and chairman N.R. Narayana Murthy sold company shares worth around US$37mn to set up a venture capital fund for incubating Indian start-ups. Murthy will use the money as seed capital for a venture capital fund which he plans to set up in India. A statement issued by Infosys said that the proposed venture capital fund would encourage and support young entrepreneurs having brilliant business ideas. "The fund will primarily invest in India and may, on a case-to-case basis, consider investing overseas," Infosys said. In a statement issued to the stock exchanges on Thursday, Infosys said that Murthy had sold eight lakh shares, some 0.13% of the company's equity capital, on October 21 and October 22, raising around Rs1.74bn. After the transactions, Murthy holds 2.38mn shares in Infosys.
The Government deferred a proposal by Jet Airways to raise US$400mn. The airline had planned to raise the funds from FIIs as the appetite for domestic investment in the aviation sector in India is not that strong. The Centre approved 26 proposals of Foreign Direct Investment (FDI) amounting to Rs13.61bn approximately based on the recommendations of the Foreign Investment Promotion Board (FIPB) in its meeting held on October 9. In total, 14 proposals were deferred. A plan by Opto Circuits (India) Ltd., Bangalore to issue Convertible Warrants on a preferential basis was also put on hold. UTV Software Communication Ltd.'s proposal to issue and allot equity shares pursuant to the Scheme of Arrangement approved by the Bombay High Court was also deferred. The proposed Joint Venture between EADS Deutchland GmbH (EADS), Germany and Larsen & Toubro Ltd. (L&T), Mumbai was rejected yet again. The two companies plan to incorporate a manufacturing JV company to undertake the production of defence equipment. Four proposals were rejected, including that of ByCell Telecommunication Pvt. Ltd. One proposal has been advised to access automatic route.
The Central Bureau of Investigation (CBI) raided the offices of the Department of Telecommunications (DoT) on suspicion that wireless mobile phone network licences were awarded below the market price last year. The CBI has registered criminal cases against unnamed officials working in the DoT and company executives for colluding to keep prices down, CBI spokesperson Harsh Bhal said. He said investigations had revealed the sale of the 2G licences in 2008 was conducted on a first come, first served basis at 2001 prices without competitive bidding or an auction. The DoT also put a cap on the number of applicants, which was against the regulator TRAI's recommendations, he said. But, Telecom Minister A. Raja denied any corruption in the awarding of new 2G licences to telecom companies last year after the CBI raids. "Licences were issued in accordance with the law. I had no external pressure to deviate from the law," he said. Raja said that the allocation of new 2G licenses conformed with a long-standing telecom policy. The BJP demanded that Raja be sacked and the CBI be given a free hand in the investigations.
The IT industry is exiting its worst year ever, as worldwide IT spending is on pace to decline 5.2 percent, according to Gartner, Inc. Worldwide enterprise IT spending will struggle more with IT spending dropping 6.9%. The IT industry will return to growth with 2010 IT spending forecast to total US$3.3 trillion, a 3.3 % increase from 2009.
Gartner provided the latest outlook for the IT industry during Gartner Symposium/ITxpo, which is taking place here through October 22. While IT spending will increase next year, Gartner cautioned IT leaders to be overly optimistic.
“While the IT industry will return to growth in 2010, the market will not recover to 2008 revenue levels before 2012,” said Peter Sondergaard, senior vice president at Gartner and global head of Research. “2010 is about balancing the focus on cost, risk, and growth. For more than 50 percent of CIOs the IT budget will be 0 percent or less in growth terms. It will only slowly improve in 2011.”
The computing hardware market has struggled more than other segments with worldwide hardware spending forecast to total $317 billion in 2009, a 16.5 percent decline. In 2010, spending on hardware spending will be flat. Worldwide telecom spending is on pace to decline 4 percent in 2009 with revenue of nearly $1.9 trillion. In 2010, telecom spending is forecast to grow 3.2 percent. Worldwide IT services spending is expected to total $781 billion in 2009, and it is forecast to grow 4.5 percent in 2010. Worldwide software spending is forecast to decline 2.1 percent in 2009, and the segment is projected to grow 4.8 percent in 2010.
On a regional basis, emerging regions will resume strong growth. “By 2012, the accelerated IT spending and culturally different approach to IT in these economies will directly influence product features, service structures, and the overall IT industry. Silicon Valley will not be in the driver’s seat anymore,” Mr. Sondergaard said.
From a budget perspective, there are three important items that IT leaders must consider in 2010:
1)A Shift from Capital Expenditure to Operational Expenditure in the IT Budget — Concepts such as cloud services will accelerate this shift. IT costs become scaleable and elastic. CIOs need to model the economic impact of IT on the overall financial performance of an organization. For public companies, they must show how IT improves earnings per share (EPS).
2)Impact of the Increased Age of IT Hardware — With delayed purchases of servers, PCs and printers likely to continue into 2010, organizations must start to assess the impact of increased equipment failure rates, and if current financial write-off periods are still appropriate. Approximately 1 million servers have had their replacement delayed by a year. That is 3 percent of the global installed base. In 2010, it will be at least 2 million. “If replacement cycles do not change, almost 10 percent of the server installed base will be beyond scheduled replacement be 2011,” Mr. Sondergaard said. “That will impact enterprise risk. CFOs need to understand this dynamic, and it’s the responsibility of the CIO to convey this in a way the CFO understands.”
3) IT Must Learn to Build Compelling Business Cases — 2010 marks the year in which IT needs to demonstrate true line of sight to business objectives for every investment decision. IT leaders can no longer look at IT as a percentage of revenue. CIOs must benchmark IT according to business impact.
Mr. Sondergaard said three additional topics that were important in 2009 will continue to dominate IT leaders’ agendas in 2010. These three topics include
Business Intelligence — Users will continue to expand their investments in this area with the focus moving from “in here” to “out there”
Virtualization — IT leaders should not just invest in the server and data center environment, but in the entire infrastructure. In 2010, users will create the cornerstone for the cloud infrastructure. They will enable the infrastructure to move from owned to shared.
Social Media — Organizations are starting to scale their efforts in this space. The technologies are improving and organizations realize this is not only about digital natives. It’s about all client segments including the most significant: the population in the next 10 years, the above 60 year old generations.
While those topics are key to IT agendas today, Mr. Sondergaard highlighted three themes that will become important going forward. They include:
Context-Aware Computing — This is the concept of leveraging information about the end user to improve the quality of the interaction. Emerging context-enriched services will use location, presence, social attributes, and other environmental information to anticipate an end user’s immediate needs, offering more sophisticated, situation-aware and usable functions.
Operational Technology (OT) — OT is devices, sensors, and software used to control or monitor physical assets and processes in real-time to maintain system integrity. The rapid growth of OT is increasing the need for a unified view of information covering business process and control systems. OT will become a mainstream focus for all organizations.
Pattern-Based Strategy — This is a new model about implementing a framework to proactively seek, model, and adapt to leading indicators, often termed “weak” signals, that form patterns in the marketplace, and to exploit them for competitive advantage. A Pattern-Based Strategy will allow an organization to not only better understand what’s happening now in terms of demand, but also to detect leading indicators of change, and to indentify and quantify risks emerging from new patterns rather than continuing to focus on lagging indicators of performance.
The World Gold Council (WGC) announced a 5.7% growth in gold sales with a total of 56 tons volume sales for the period from October 12-19 as compared to the same period last year. The Diwali week this year witnessed Rs 89.04bn worth of gold sales resulting in a growth of 39.2% over the same period last year. This period covers the auspicious festival of Diwali and other gold buying festivals like Pushya Nakshatra, Dhanteras, Bestu Varas/New Year Day and Bhai Dooj/Bhau Beej. Indian consumers flock to jewellery outlets every year on these days to make their traditional gold purchases. The figures released by WGC are based on a study of all the participating retailers across India for ‘The Great Indian Gold Rush’. Gold has a special relevance to the Indian festive season. This pan-India gold festival ensured consumers were even more connected to the precious metal. This shopping festival was instrumental in the growth of gold sales this year as retailers have received an overwhelming response from the consumers.
India's key inflation, as measured by the Wholesale Price Index (WPI), climbed to its highest level in 20 weeks mainly due to a spurt in prices of primary food articles. The inflation stood at 1.21% during the week-ended October 10, the highest since May 23 when it was 1.34%. The latest headline inflation estimate was higher than the previous week’s 0.92% annual rise. Inflation was recorded at 11.3% during the corresponding week of the previous year. The official WPI for ‘All Commodities’ for the latest week rose by 0.1% to 242.2 points from 241.9 points in the previous week. Inflation for the Primary Articles group rose to 8.62% from 8.30% while that for the Fuel & Power group was flat at (-)6.80% and for the Manufactured Products group was at 1.26% versus 0.87% in the preceding week. Inflation for Food Articles group stood unchanged at 13.34% from the previous week while that for the Non-food Articles group inched higher to (-)1.17% from (-)2.06%. The inflation build up in the financial year so far is 5.95% compared with a build up of 5.56% in the corresponding period a year ago. The 52-week average inflation for the latest week was 2.49%. The Government revised the inflation rate for the week ended August 15, to (-)0.21% from the preliminary forecast of (-)0.95% while the final WPI for the same period stood at 240.6 points compared with the provisional estimate of 238.8 points.
The Prime Minister’s Economic Advisory Council (EAC), headed by former Reserve Bank of India (RBI) governor C Rangarajan, said that it sees gross domestic product (GDP) growing by 6.5% in 2009-10 even as it warned about rising inflation and a ballooning fiscal deficit. "It is unlikely that GDP growth will be lower than 6.25%, but may reach 6.75%," the panel said in its Economic Outlook for 2009-10 report to Prime Minister Dr. Manmohan Singh. The RBI had in July forecast that India’s economy would grow by 6% in FY10, with an upward bias. The Planning Commission said in early September that it sees GDP growth at 6.3% this fiscal. The Indian economy had expanded by 6.7% in 2008-09 after three years of growing at over 9%.
The EAC expects the consolidated fiscal deficit of the Centre and the States at 10.09% for FY10 and sees inflation, imported and local, as a significant risk for the economy. Wholesale price inflation could rise to 6% by the end of March 2010, it said. "Accommodative monetary policy will continue till March 2010. The accommodative policy stance will have to change, but that will depend on the growth performance of the economy and taking into account inflationary pressures," Rangarajan said. Unless inflation breaches 6%, the monetary authorities may not take action, he said. The question of rolling back tax breaks will come up for review only early next year, Rangarajan added.
The winning ways appear to have come to a halt and we can only hope it is temporary. Even as the indices remain subdued the stock exchanges have been permitted to set their trading hours in the cash and derivatives segments between 9 am and 5 pm. We’ll wait and see what the final timings will be. A longer timing does not in anyways give you an opportunity to time the market. The coming week promises a lot of action with results pouring in from major companies coupled with the RBI’s monetary policy. Though the bias remains more on the positive side, one needs to exercise extreme caution in counters which have run ahead too fast.
Nifty October 2009 futures were at 5007, at a premium of 9.95 points as compared to the spot closing of 4,997.05. Turnover in NSE's futures & options (F&O) segment was Rs 79,719.69 crore, lower than Rs 86,383.23 crore on Thursday, 22 October 2009.
Reliance Industries (RIL) October 2009 futures were at a slight premium at 2055.05 compared to the spot closing of 2051.25.
State Bank of India (SBI) October 2009 futures were at a slight premium at 2363.15 compared to the spot closing of 2360.
DLF October 2009 futures were near spot price at 455.05 compared to the spot closing of 454.50.
In the cash market, the S&P CNX Nifty gained 8.45 points or 0.17% at 4,997.05.