After struggling for most part of the week, the key stock indices made a comeback on Friday to close with gains on a weekly basis. Remarks from key government officials that it is not considering imposing any tax to curb foreign capital flows aided the sentiment. Finally, the NSE Nifty rose 1.07% and the BSE Sensex added 1% over the week.
The BSE Sensex hit an intra-week high of 17,098 and low of 16,635 and the NSE Nifty hit an intra-week high of 5,079 and low of 4,932.
The Foreign Institutional Investors (FIIs) bought shares worth Rs26.18bn during the week. While the Domestic Institutions were net sellers to the tune of Rs8.15bn during the week.
The top gainers: The top gainers in the Sensex were Tata Steel (up 6.2%), Reliance Capital (up 5.1%), Hero Honda (up 4.6%), Maruti Suzuki (up 4.4%) and ACC (up 3.7%).
The Top Losers: The top losers in the Sensex were Reliance Infrastructure (down 4.9%), Bharti Airtel (down 4.4%), ICICI Bank (down 1.3%), ONGC (down 1.3%) and Tata Power (down 0.7%),
The BSE IT Index (up 2.1%): The top losers in IT sector were Patni Computer (down 12.3%), Mphasis (down 7.6%), Mahindra Satyam (down 4.9%), HCL Tech (down 3.1%) and Financial Tech (down 0.9%).
Wipro gained 2.6% during the week. The company’s subsidiary signed a five-year deal with the US-based Cliffs Natural Resources Inc, to provide IT infrastructure services.
Infosys advanced 3% during the week. According to reports, the company's consulting arm is planning to acquire a small consulting company with revenues in the US$100-140mn as part of its inorganic growth initiatives in the US.
TCS was the other notable gainer in the week, the stock rose 3.4%.
According to a report released by IIFL during the week, “With salary hikes and a likely pick-up in hiring along with the risk of a rising rupee, can margin compression upend a volume-led recovery for Indian IT services vendors? We believe the answer is a negative. Margin risks due to rising salaries are low, given the excess supply in the ‘fresher’ pool (low hiring and delay in campus intake during 2009 meant top vendors’ headcount has risen only upto 6.5% in 2QFY10 YoY). As such, the distribution of wage hikes is likely to be skewed towards laterals. Also, current utilisation rates of top-tier vendors are low (67-73%) and have a considerable scope to increase (during the FY03 recovery, Infosys’s utilisation had risen to 79%). Meanwhile, while the appreciation of INR vs US$ remains a risk, top tier vendors – Wipro and TCS have diversified their revenue streams away from US. Also, our estimates for FY11 are based on an average US$/INR exchange rate of 46”.
The BSE Consumer Index: The top gainers in the consumer durables space were Samtel Color (up 9.1%), Whirlpool (up 4%), Videocon Industries (up 1.7%) and Su-Raj Diamonds (up 1.4%).
The BSE Healthcare Index (up 1.4%): The top gainer in the Pharma space was Glenmark Pharma. The stock rose over 14% during the week after reports stated that Glenmark Generics settled all pending litigation with Medicis Pharmaceutical Corp relating to patent actions on Fluocinonide.
Strides Arcolab (up 5%), IPCA Labs (up 4.6%), Natco Pharma (up 4.3%) and Orchid Chemical (up 3.4%) were among the other major gainers.
The top losers in were Morepen Labs (down 3.6%), Torrent Pharma (down 3.2%), Zandu Pharma (down 2.5%), Divi’s Labs (down 1.5%) and Suven Life Sciences (down 1.5%).
Dr Reddy’s Labs advanced by 1% during the week, a recent report released by IIFL stated, “Dr Reddy’s management, in investor meetings hosted by us, reiterated that it is on course to its goal of US$3bn revenues and 25% ROCE in FY13.
• Overall FY10 US sales could be significantly higher than in FY09—this is a major upside to our numbers.
• The company successfully completed its FDA inspection last week without any major observations.
• German business remains unpredictable; minor intangible writedowns and one-time retrenchment expenses possible.
• No major problems foreseen in Russia, but growth rates may temper.
• Dr Reddy’s continues to be our top pick in pharma space”.
The BSE Banking Index (up 0.5%): The top gainer in the banking sector was OBC. The stock rose over 9% during the week as the company has reportedly sought capital support of Rs10bn from the government to implement its expansion plan.
Bank of India (up 6%), Allahabad Bank (up 5.8%), Andhra Bank (up 3.5%) and Union Bank of India (up 3.2%) were among the other major gainers.
The top losers were Kotak Mahindra Bank (down 2.1%), Canara Bank (down 1.8%), Yes Bank (down 1.4%), ICICI Bank (down 1.3%) and Karnataka Bank (down 0.5%).
The BSE Auto Index (up 2.2%): The top gainers in the auto space were Eicher Motors (up 5.2%), Hero Honda (up 4.6%), Maruti Suzuki (up 4.4%), Tata Motors (up 3.5%) and Ashok Leyland (up 3%).
The top losers were Swaraj Mazda (down 2.1%) and Hindustan Motors (down 0.4%).
The BSE Oil & Gas Index (up 0.3%): The top gainers in the oil & gas space were Jindal Drilling (up 12.6%), Great Offshore (up 4.5%), Chennai Petroleum (up 2.4%), Cairn India (up 2.2%) and Essar Oil (up 1.7%).
The top losers were Hindustan Oil (down 9.8%), Shiv-Vani Oil (down 3.2%), HPCL (down 2.9%), MRPL (down 1.9%) and Gujarat NRE Coke (down 1.8%).
The BSE Capital Goods Index (0.0%): The top gainers in the capital goods space were Aban Offshore (up 11.2%), Thermax Ltd (up 9.8%), Elgi Equipments (up 3.9%), Gammon India (up 3.2%) and Esab India (up 2.2%).
The top losers were Crompton Greaves (down 3.1%), Kirloskar Brothers (down 2.8%), Usha Martin (down 2.4%), Alstom Projects (down 2.3%) and Bharat Electronics (down 1.9%).
The Cement Sector: The top gainers in the cement space were Ultratech Cement (up 8.4%), Mangalam Cement (up 4.9%), JK Cements (up 4.7%), ACC (up 3.7%) and Prism Cement (up 2.3%).
The top losers were Gujarat Sidhee (down 4.3%), Kakatiya Cement (down 3.7%), Binani Indus (down 3.6%), India Cements (down 1.4%) and Dalmia Cement (down 1.3%).
Grasim gained 1.5% during the week. According to a report released by IIFL, “The merger ratio between Grasim’s two subsidiaries—the 65%-owned Samruddhi Cement (SCL) and 55%-owned UltraTech Cement (UCL)—has been fixed at 4 shares of UCL for 7 shares of SCL. The merger ratio balances the medium and long-term prospects of two subsidiaries, in our view. Based on book values of SCL and UCL as on 1 October 2009, the merger ratio works out to 1 share of UCL for 2.2 shares of SCL; based on our FY11 estimates for SCL and UCL, the merger ratio works out to 1 share of UCL for 1.1 share of SCL. We expect the merger ratio to be EPS-accretive for UCL for FY11 and FY12, given the poor fundamentals of west and south regions for the next two years (UCL’s current cement capacities are concentrated in west and south regions). We upgrade our FY11 earnings estimate for UCL by 18% and downgrade it for Grasim by 16% to reflect the effect of restructuring and our pricing assumptions. We retain ADD rating on both companies with revised target prices of Rs2,732 for Grasim (including shareholders’ direct holding in SCL) and Rs874 for UltraTech”.
The Telecom Sector: The top losers in the telecom sector were WWIL (down 8.9%), Bharti Airtel (down 4.4%), TTML (down 3.9%), Tata Communication (down 2.9%) and MTNL (down 2.5%).
The top gainers were Shyam Telecom (up 5.3%), Idea Cellular (up 1.3%) and RCom (up 0.1%).
The Realty Sector (down 1.1%): The RBI's recent move which aims to curb lending to real estate sector continues to act as an overhang on the sector.
The top losers were HDIL (down 5.4%), Parsvnath Developers (down 3.6%), Unitech (down 3.1%) and Omaxe Ltd (down 1.1%).
The top gainers in the real estate space were Anant Raj Indus (up 6.9%), Sobha Developers (up 3.5%), Mahindra Lifespace (up 2.6%), Ansal Props (up 1.9%) and DLF (up 1.9%).
HDIL fell 5.5% during the week. A report released by IIFL during the week stated that, “HDIL differentiated itself from other real-estate companies by rapidly executing Phase I of the Mumbai airport rehabilitation project in the face of liquidity constraints through a large part of the last 18 months. Its new strategy—to transform itself from a seller of FSI and TDR to a ‘construct and sell’ developer—will bring in-house the attractive developer margins on such projects and substantially add to its value. The favourable decision at the Bandra Kurla Complex SRS scheme reflects its ability to work with SRS regulators. HDIL will control ~70% of the TDR supply in Mumbai over FY10-16ii and is the largest beneficiary of the buoyancy in TDR prices. The company derives 70% of its NAV from Mumbai, the most resilient real-estate market in India. We recommend BUY with target price of Rs436/share, at one-year-forward NAV”.
The Metals sector (up 3.6%): The top gainers in the metal space were Bhuwalka Steel (up 25.2%), Lloyds Metals (up 11.8%), Jindal Stainless (up 11.1%), Tata Metaliks (up 10.6%), Monnet Ispat (up 10.2%) and Jindal Steel (up 4%).
JSW Steel surged 7% during the week after the company inked a deal with Japan's JFE Steel to jointly develop a 10mn ton steel project in West Bengal. The companies also agreed on a production tie-up and may acquire stakes in each other.
SAIL surged over 5% during the week. Reports stated that the government is set to dilute its holding in SAIL by 20%. While the company will make a fresh issue of 10% equity, the government will divest 10% of its stake.