Inflation softens further
The slew of monetary and fiscal measures taken by the Government coupled with a high base effect seems to be paying some dividends as far as inflation is concerned. India's inflation, based on the Wholesale Price Index (WPI), declined further to 5.66% in the week ended April 28, the government said on Friday. The reading on wholesale prices came in ahead of consensus estimates for a fall to 5.71-5.73%. Inflation stood at 5.77% in the previous week and was at 3.9% during the corresponding week of the previous year. If this trend continues for a while, the Reserve Bank of India (RBI) and the Government won't have to unleash new sets of measures to contain spiraling prices in a booming economy. Interest rates may well remain stable at current levels unless there is a renewed spike in inflation.
March industrial output growth at 12.9%
A separate report showed that India's industrial sector continued to be on a high growth path in March. The Index of Industrial Production (IIP) grew by an impressive 12.9% in the last month of FY07 as against 8.9% in the same month last year, data from the Commerce & Industry Ministry showed today. Average expectations among economists ranged between 10-10.5%. The Government revised the IIP growth figure for February, from a provisional estimate of 11% to 10.8%. Manufacturing, the cornerstone of the current boom in the industry, led the expansion in March with a strong 14.1% growth over the 10.1% growth registered in the corresponding month last year. For the whole year (2006-07), the IIP grew by 11.3% compared to 8.2% in the year 2005-06.
Market loses ground
It has been a roller-coaster ride for the bulls yet again. As we have mentioned earlier, liquidity will play an important role in driving the markets forward. After an excellent April driven by strong corporate growth and increase in FII activity, the month of May is turning out to be pretty dull for the bulls. Other than liquidity problem, lack of confidence among the investors is making difficult for bulls to make their presence felt on Dalal Street.
The intra-day reversals in the last few trading sessions pressurized the bulls and made it difficult to hold on to their gains. Over the week, the BSE Sensex lost almost 1% 138 points to close at 13796. The NSE Nifty also shed 1% or 41 points to shut shop at 4077. The weakness was led by selling in IT and Pharma stocks. IT stocks continued to bear the burnt of the rising rupee. Infosys, TCS and Wipro were among the major losers.
Select steel stocks shone brightly following reports that the Government would not intervene to control rising steel prices. Index heavy weight Tata Steel gained 3% to Rs569, SAIL was up by 1% at Rs135, Jindal Steel advanced 3.6% to Rs3030 and Bhushan Steel surged by over 5% to Rs565.
Banking stocks recovered much of the losses suffered earlier during the week. The latest IIP numbers, which were released on Friday afternoon indicated strong industrial growth. India's industrial production growth unexpectedly accelerated in March, output at factories, utilities and mines gained 12.9% from a year ago. Also, reports that Reserve Bank of India may cut the minimum SLR limit from the present level of 25% boosted Banking stocks. The index marginally gained by 0.4%. Frontline stocks like HDFC Bank slipped 1% to Rs997, ICICI Bank were down 0.8% to Rs848. However, SBI rose 1.8% to Rs1149. Others like J&K Bank, Corp Bank and IndusInd Bank were major losers.
Sugar stocks were in action on Friday on speculation that new Government in UP will provide some sops to the sugar companies. Talks of hike in Sugarcane price are already going around in the market. After a long period of time some sweetness returned to the Sugar counter as the Sugar stocks cheered the outcome of UP State elections. Renuka Sugar jumped by over 9% to Rs526, Balrampur Chini advanced 4.3% to Rs68, Bajaj Hindusthan was up 1.7% to Rs169 and Dwarikesh Sugar gained 1.8% to Rs69.
IT stocks continued to be a laggard as concerns of rising rupee played spoilsport in the minds of investors. Heavyweights like Infosys, TCS and Wipro underperformed the key indices. The IT index was the major loser as it lost 3.1% during the week. Front line stocks were the most hit, Wipro lost by over 3.5% to Rs545, Infosys was down by over 3.5% to Rs2000, Satyam Computer declined 3.5% to Rs454 and TCS slipped 1.7% to Rs1252.
Pharma stocks also were in poor health. The index was down 1.7% during the week. Cipla was among the major loser. The scrip lost by over 5.5% to Rs204, Dr Reddy's Lab was down by over 5% to Rs683, Wockhardt declined over 5.5% to Rs399 and Lupin fell 4.1% to Rs707.
Bajaj Auto, India's second biggest motorcycle maker gained momentum after the company announced that the Board of Directors would consider a proposal to split the company. The scrip was the top gainer among the Nifty scrip's gaining nearly 6% to finally close at its week's high of Rs2718 after hitting a low of Rs2391.
Uncertain times for bulls
The market needs fresh impetus to move forward. The Fed meet is out of the way and so is the outcome of the UP elections. When not much on earth is happening, the markets may look towards the sky Gods and the predictors to get a whiff of what lies ahead as far as the monsoon is concerned. The market is likely to consolidate in the near term with no major triggers available at the moment. One may have to wait for a while before the major indexes hit new historic peaks.
Given the volatile movement of the indices, the relatively low confidence of investors at these levels, especially the retail ones we see another volatile trading week and extremely high intra-day gyrations. Global cues will also be watched closely as they have assumed a lot of significance off late. After all, its more of the the weakness across the world indices that has led to the decline in local indices as well.
Rupee snaps 9-week winning streak
The rupee on Friday broke the sequence of nine consecutive weekly gains due to growing dollar demand from importers following the local currency's unprecedented rise this year. A stronger rupee means importers have to convert less to purchase foreign exchange. The rupee lost 0.9% on the week to 41.25 against the dollar. This is the Indian currency's weakest level since April 23 and its biggest weekly loss in almost a year. On Thursday, it fell by nearly 37 paise to shut shop at 41.28/30 as call money rates slumped amid improving liquidity. The partially-convertible currency had touched a nine-year high of 40.5450 on May 7, the strongest since May 1998. The rupee has rallied by 8.4% in the past nine weeks through May 4, its best winning streak since May 2003, due to growing foreign capital flows in Asia's fourth-largest economy, which is estimated to grow by 9.2% in FY07.
UP polls...BSP gains huge lead as SP flounders
The Mayawati-led Bahujan Samaj Party (BSP) dealt a brutal blow to Mulayam Singh Yadav's Samajwadi Party (SP) in the just concluded assembly polls in the country's largest state. Beating all optimistic forecasts, Mayawati's BSP broke the 200-seat barrier in the 403-member UP Assembly with surprising ease and is now all set to form the next government on its own. Mayawati will decide her future course of action after meeting her party legislatures on Saturday evening. She is likely to meet the UP Governor TV Rajeshwar after the meeting to stake her claim to form the next government. Meanwhile, UP chief minister Mulayam Singh Yadav blamed the Election Commission (EC) for his party's defeat after submitting his resignation to the state governor. Yadav accused the EC of running a parallel government and said it was not good for the democracy.
Monsoon sets in over Bay of Bengal: IMD
Southwest monsoon, which is key for the growth of India's agriculture sector, set in over parts of southeast Bay of Bengal, Nicobar islands and Andaman Sea, the India Meteorological Department (IMD) said on May 10. The monsoon arrived about eight days earlier than normal. Rains typically start in the east coast by May 18. "Conditions are favourable for further advance of southwest monsoon over some more parts of Andaman Sea and southeast Bay of Bengal during next 48 hours," the IMD said on its Web site. The monsoon will be 95% of the long-term average, the weather department said in its April 19 forecast. The IMD may forecast the onset of the monsoon over the southern Kerala coast on May 12 or May 14. The four-month rainy season typically begins on June 1.
Govt mulling easing 5-yr norm for overseas flights
There is some good news for those who dream of flying in the jumbo Airbus A-380, courtesy Kingfisher Airlines. According to newspaper reports, the Government is toying with the idea of relaxing the mandatory five-year experience limit in the domestic market for local airlines to fly abroad. The Ministry of Civil Aviation is reportedly looking at granting permission to domestic carriers to launch international flights on a case-by-case basis. The Government plans to review, by the end of the year, the current norms for domestic airlines flying abroad, Civil Aviation Minister Praful Patel said. "The issue would be reviewed on the basis of the need of the sector and the ability of the carrier to be able to serve international routes," he added. What's more, soon private airlines such as Jet Airways and Air Sahara will be able to launch flights to the Gulf region as the Centre is planning to open up the sector to private airlines by the beginning of 2008.OVL consortium strikes it big in Persian Gulf
ONGC Videsh Ltd. (OVL), along with Indian Oil Corp. (IOC) and Oil India Ltd. (OIL), struck a large reservoir of oil and gas off the Iran coast in the Persian Gulf. OVL and its public sector peers will prepare a plan in the next three months on commercial production from the field, ONGC Chairman R.S. Sharma was quoted as saying. Gas reserves in the block are estimated to go up to 10 trillion cubic feet, while oil reserves in the block are estimated to be in the region of 1 billion barrels, according to a financial daily. Production from the field is estimated to begin in another five years, the newspaper said. In Dec. 2002, the consortium signed a contract with National Iranian Oil Co. to carry out exploration in the Farsi block. OVL and IOC hold 40% each while OIL holds the rest.
Maha Mumbai SEZ still in Govt cold storage
Smarting from the ugly episodes of violence in West Bengal over the issue of land acquisition for Special Economic Zones (SEZ), the Board of Approvals (BoA) deferred a decision on the controversial Maha Mumbai SEZ promoted by Reliance Industries Ltd. (RIL). Out of the 23 proposals for conversion of in-principle approval to formal approval considered, the BoA granted formal approval in 16 cases. Among the prominent ones that got the go-ahead included SEZs from Suzlon, Vedanta, DLF and Unitech. The May 9th meeting was the first in six months as the Government had put all new SEZ proposals on hold in the wake of the political storm raised by Tata Motors' Singur car project and violence at Nandigram in West Bengal.Govt exits Maruti with Rs23.7bn in pocket
The Government approved the sale of its remaining 10.27% stake in Maruti Udyog Ltd. to banks, financial institutions and insurance companies at an average price of Rs797 per share. The sale would fetch the Government Rs23.68bn, P.V. Bhide, Secretary in the Department of Disinvestment said after a meeting of a Group of Ministers headed by Finance Minister P. Chidambaram. The Government had set a floor price for the bidding at Rs760 a share. The shares were sold to 32 bidders. LIC got the biggest portion of 13mn shares. SBI got 5mn shares. Corporation Bank was the highest bidder at Rs850 and got 588,235 shares. Reliance MF got 2mn shares. HDFC MF got 1mn shares and UTI MF 88,998 shares.DLF IPO gets SEBI nod
DLF received an approval from capital market regulator SEBI for its much-delayed IPO. The real estate giant is expected to raise around Rs136bn according to reports. The approval comes nearly a year after the company first filed the draft red herring prospectus. DLF proposes to enter the capital market with a public issue of 175mn shares of Rs2 each through 100% book building process. Ramesh Sanka, CFO, DLF was quoted as saying that the company has got the nod from SEBI and will update the document and file with the Registrar of Companies (ROC). The IPO is expected to hit the market in three months. The IPO will involve at least 10% of equity dilution, say reports. Kotak Mahindra and DSP Merrill Lynch along with four others are the Lead Book Managers.
Fortis Healthcare makes dull debut
Fortis Healthcare Ltd., a Ranbaxy promoter group company, made a lackluster debut on May 9 with the stock slipping below the Rs100 mark amid talk of high valuation. The stock opened at Rs105 on the BSE as against the issue price of Rs108 per share. It finally ended at Rs100 after touching a high of Rs109.1 and a low of Rs97.9. The stock finished the week at Rs. Fortis had fixed the issue price towards the upper end of the IPO price band of Rs 92-110 per share. The IPO was subscribed 2.78 times with the company receiving bids for over 127.4mn shares as against 45.7mn shares on offer in the public issue.
Rate hikes hit auto sales
Rising interest rates has started to pinch the automobile industry. Though India's passenger car sales grew by 11.3% last month to 82,934 units (74,542), domestic sales of two-wheelers fell 6% to 570,381 units, the Society of Indian Automobile Manufacturers (SIAM) said. Bike sales have been the hardest hit as it is the most price-sensitive segment in the entire industry. Motorcycle sales fell by 9.7% in April to 463,091 units. Sales of commercial vehicles (CV) grew by 6.5% to 30,836 units in April and exports surged by 19.3% to 90,551 units, data released by the New Delhi-based automobile industry body showed. Total automobile vehicle sales were down 3.2% in April at 732,724 units, according SIAM.Bajaj Auto to mull demerger on May 17
Shares of Bajaj Auto Ltd. rose after the company said that its Board will consider the proposal for the demerger on May 17. The demerger involves splitting Bajaj Auto into two separate units - one for manufacturing and the other for financial services business. This is the first formal announcement by Bajaj Auto on the demerger issue and comes four years after founder Rahul Bajaj first talked about it in 2003. Some time back, the Bajaj family patriarch had denied newspaper reports that the split was due to differences between his two sons - Rajiv and Sanjeev, and was aimed at enhancing shareholders value. Some part of the company's huge cash surplus is likely to be transferred to the demerged finance company to fund its growth. The Pune-based two-wheeler major will also consider the audited financial results for the year ended March 31, 2007 and dividend for the said year.
There is no end in sight to the big-ticket mergers and acquisitions. Alcoa Inc. said it had made a US$26.9bn bid for Alcan Inc. after merger talks between the North American rival aluminum producers fell through. Each Alcan share would be exchanged for US$58.60 in cash and 0.4108 of an Alcoa share. That values Alcan at US$73.25, or 20% more than its closing price on May 4, New York-based Alcoa said in a statement. Including debt, the deal would be valued at US$33bn. Montreal-based Alcan said that its board is reviewing the offer and asked shareholders to wait for its recommendation before taking action. Separately, shares of Rio Tinto touched a record high amid market grapevine that bigger rival BHP Billiton had made an unsuccessful takeover bid for the world's third-largest mining firm. BHP shares also hit a record high. But, Rio Tinto denied speculation that BHP had approached it with a takeover proposal.
Thomson to buy Reuters for US$17.6bn
Thomson Corp. on Tuesday confirmed that it was in talks to acquire Reuters Group Plc for about £8.8bn (US$17.6bn) to create a global leader in the business-to-business information markets. Reuters shareholders would get 352.5 pence in cash and 0.16 share of Thomson stock per share under the transaction being discussed, the two companies said. Woodbridge, the Thomson family holding company, would own about 53% of Thomson-Reuters, while other Thomson shareholders will hold about 23% and Reuters shareholders about 24%. The enlarged group would be called Thomson-Reuters and the combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters.
More global deals...
In more news on deals, BAE Systems made its largest acquisition since it sold its stake in Airbus last year. Europe's biggest defence contractor and a key supplier to the Pentagon agreed to pay US $4.1bn for Armor Holdings, which makes, among other things, armaments for Humvees. In addition, UniCredit SpA, Italy's biggest bank, said that it was considering acquisitions of France's Societe Generale SA or Capitalia SpA in a record year for European bank takeovers. Meanwhile, a private-equity consortium conceded defeat in its attempt to buy Qantas Airways. Led by Australia's Macquarie Bank, it missed a deadline to gain the support of 50% of shareholders (though it later claimed that it had collected just enough votes). The Australian airline's directors, who backed the A$11.1bn (US$9.2bn) bid last year, were criticised for not doing enough to get investors on board.