The Week That Was
Impasse, be it in Lok Sabha or over fate of the Indian economy, currency and NSEL, weighed on sentiment throughout the week. The benchmark indices posted its third consecutive week of losses, with the indices plunging nearly 9%. For the week, the Nifty and Sensex were down 2.9%. The week saw the Nifty sliding below the 5,500 mark for the first time since April 2013 on account of currency depreciation and payment concerns surrounding the National Spot Exchange.
Financial Technologies plummeted over 60% in a single trading session on on July 31, after NSEL suspended trading on all contracts and deferred settlement. The suspension had sparked fears of cash crunch and default of payment in the Financial Technologies-promoted commodity bourse. The stock, however, recovered partially during the week after NSEL said most trading members have agreed to settle their outstanding contracts via a process, which may take several months. The, commodity market regulator, Forward Markets Commission stepped in and instructed the National Spot Exchange to repay small investors with exposure of less than Rs. 1mn first.
Another dampener was constant weakness in the rupee. The Indian rupee has depreciated 11.2% year-to-date against the dollar in the backdrop of concerns over likely downgrade by global rating agencies considering the country’s precarious current account deficit situation. It fell to a record low of 61.80 against the dollar on Tuesday. This may further worsen investor sentiment after the exodus of hot money from debt markets. Also, the rupee’s weakness has made things worse for companies having foreign debt on their books with minimal hedging.
In economic news, the government appointed Raghuram Rajan as the next Governor of the Reserve Bank of India. Rajan will replace Duvvuri Subbarao, whose tenure ends on September 4 after five years.
In related news, the services sector in July contracted for the first time since October 2011, according to the HSBC Purchasing Managers’ Index. The index dived to 47.9 points from 51.7 points in June, the steepest fall since April 2009,
In major corporate news, Rajiv Bajaj has given a week's ultimatum to the top management and the union to resolve the 42-day-old strike at the Chakan plant, failing which he warned that the company will be forced to move the board to shift production to other plants. He said the company will be forced to move at least 50% of production and production capacity to the Aurangabad and Pant Nagar plants.
In major international news, central banks -- Bank of England, European Central Bank, Bank of Japan -- have maintained a status quo on policy rates. Only Bank of Australia bucked the trend by cutting interest rates.
It was a week of positive cues from the United States. Trade deficit narrowed sharply in June to its lowest level in more than three-and-a-half years as imports reversed the prior month's spike, suggesting an upward revision in Q2 CY13 growth. The Commerce Department said the trade gap fell 22.4% to $34.2bn. The percentage decline was the largest since February 2009. May's shortfall on the trade balance was revised to $44.1bn from the previously reported $45bn.
The US labour market showed signs of improvement with the Conference Board’s Employment Trends Index for July increasing 0.4%, the biggest gain since February. At 112.2, the gauge reached the highest level since June 2008 and was up 4.1% from a year earlier.
Activity in the US economy's crucial services sector grew solidly in July on a jump in business activity and new orders, the Institute for Supply Management reported. The ISM said its PMI for services rose to 56% in July, 3.8 points higher than the level in June.
US home prices jumped in June and are forecast to ramp up further in the latest signs of a housing market that is on the mend, data from CoreLogic showed. CoreLogic's Home Price Index rose 1% from May and accelerated by 11.9% from June last year. Excluding distressed sales, prices were slightly less strong, up 1.8% on the month and 11% from a year earlier.
For Europe there was some light at the end of the tunnel with Eurozone businesses expanding for the first time in 18 months in July, albeit slightly. Markit's Eurozone Composite PMI rose to 50.5 last month from 48.7 in June, breaking above the 50 threshold indicating growth for the first time since Jan 2012.
Bank of England announced a major policy shift saying explicitly that it was now targeting unemployment as well as inflation. Governor Mark Carney provided clear guidance on when it can be expected to raise Britain's record-low interest rate. BoE said that it 'intends not to raise the bank rate from its current level of 0.5% at least until the unemployment rate has fallen to a threshold of 7%' - as it provided markets with so-called forward-guidance as used by the Federal Reserve.
The International Monetary Fund warned Germany against being overly ambitious in consolidating its budget given risks to growth in Europe's largest economy, which has not decoupled from the rest of the crisis-hit euro zone. IMF, which kept its forecast for 0.3% German growth this year, said it welcomed Berlin's modest loosening of fiscal policy to boost domestic demand.
Closer home, China’s service industries showed the first pick-up in growth since March, adding to signs the world’s second-largest economy may be stabilising after a two-quarter slowdown. The non-manufacturing PMI rose to 54.1 in July from 53.9 in June.
Japan's current account surplus fell 20.3% in June from a year earlier, Ministry of Finance data showed, as rising energy imports weigh on the country's balance of payments. The decline in the surplus was larger than the median estimate for a 6.9% annual fall and was the fastest decline since February.
The coming week promises to be full of action as a slew of economic data would hit the markets. Consumer Price Index and WPI inflation for July and June IIP data would be key data to watch out for.
So, how will the market trade next week? Hadrien Mendonca, Technical Analyst at IIFL, feels the current sell-off seems to be a bit overdone. "The market is in an oversold zone. The critical support for Nifty is placed at 5,477, which is also its April 2013 low. We expect the benchmark indices to stage a dead cat bounce in the coming days. Having said that, disappointment on the economic data front would once again make the scenario vulnerable to a further sell-off."
Why Raghuram Rajan is best suited to head RBI?
The government on Tuesday selected Raghuram Rajan, the current Chief Economic Advisor to the Finance Ministry, to succeed Dr. Subbarao as the next Governor of Reserve Bank of India. Rajan’s appointment will be for a period of three years starting September 5. He brings with him significant theoretical as well as practical economic policy experience. He is probably best known for predicting the financial crisis as early as in 2007.
Raghuram Rajan appointed as RBI Governor
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NSEL suspends trading in e-series
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Eid Mubarak: Nifty ends above 5,550
After being under constant pressure for almost 10 trading sessions, the Indian equity market finally managed to close in the green with healthy gains. The Nifty closed above 5,550 while the Sensex shut shop above 18,700 levels. The market will remain closed on Friday on account of Ramzan Eid. Today’s bounce can be attributed to the slight strength witnessed in the rupee against the dollar. Sentiment received a fillip after trade data in China outpaced expectations. Chinese exports rose 5.1% as compared with the same period a year earlier while imports leaped 10.9%. The rally was led by metals, realty, power and auto stocks. Once again, midcap and the smallcap stocks outperformed the benchmark indices adding 1.3% each. However, oil and gas and healthcare stocks remained under pressure. The Sensex closed at 18,789, up 124 points, while the Nifty closed at 5,565, up 46 points over Wednesday’s close...Read More
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Net direct tax collections up 10% in April-July
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Agriculture sector grows 1.9% in 2012-13
FM seeks support on Insurance, Pension Bills
News In Focus
Hiring activity in July rises to 8% YoY: Naukri
The Naukri JobSpeak index in July has come in at 1323, 8% higher as compared to the same period last year. Among the top seven cities, Kolkata has topped the country with 16% YoY increase in hiring in July...Read More
‘See 10-20% salary hike for mid- to senior-level workers’
Owner’s Concerns versus Employee’s Concerns
Hiring activity recovers in Chennai, up 4% in July: Naukri
HR experts go social to interact with Gen Y
Harish Manwani new independent Non-Exec Director at Pearson
Reliance Retail Bijou Kurien resigns
Essar Steel appoints Firdose Vandrevala as Exec Vice-Chairman
James Kelly resigns as Director of Cummins Ind
‘HNIs cautious about eco slowdown, but maintain lifestyle’
The number of ultra high networth households has risen to 100,900 in FY13, says a report by Kotak Wealth Management and Crisil. This number is expected to more than triple in the next five years to 329,000...Read More
India ranked lowest in basic money mgmt skills: MasterCard
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Godrej Consumer Q1 review: IIFL Inst Eq retains buy
IIFL Institutional Equities, a part of the IIFL Group, has rated Godrej Consumer a buy post its Q1 FY14 results. It has a target price of Rs. 890 per share on the counter. Analysing the numbers, the brokerage said, "GCPL reported lower-than-estimated profit after tax due to higher brand spends. These spends are likely to be higher than estimated earlier since the company is investing in new products." It has cut the company's EPS estimates by 7%, 7% and 4% for FY14, FY15 and FY16, respectively. "Despite our cut, EPS CAGR of FY14-16 is robust at 25%."...Read More
Cadbury India to invest Rs 10bn
CBI arrest 2 Micromax owners for bribing NDMC officials
TIL in stake sale talk with Suntory Holdings, Pernod Ricard
Indian economy to grow at 5% in FY14: Nomura
Weak demand has limited the pricing power of Indian manufacturers. Input prices too are on an upswing owing to currency weakness and the above factors will lead margins to remain under pressure, says a latest report by Japan-based Nomura. The ratio of difference in the input and output prices in the manufacturing PMI show margins enjoyed by businesses came down in July as compared to the second quarter of the current financial year, the report said. This marks a reversal in the uptrend that was witnessed in the past few quarters...Read More
BHEL Q1 FY14 review: IIFL Inst Eq maintains sell
IIFL Institutional Equities, a part of the IIFL Group, has maintained a sell on BHEL post the latter's Q1 FY14 results. Analysing the numbers, the brokerage said, "While a declining order book did portend weak revenues, the 23% year-on-year decline in Q1 revenues was unexpected. Deteriorating execution rate has exacerbated the order book decline. EBITDA margin contracted 860bps YoY despite 110bps gross margin expansion due to negative operating leverage. Staff strength would gradually decline on natural attrition but costs are unlikely to go down due to autonomous inflationary increases. Order inflow was weak at just Rs. 14.7bn resulting in order book declining by 18% YoY on a depressed base." It sees the company missing its flat revenues trajectory for FY14 by a wide margin and has cut its earnings estimates by 30% and 32% for FY14 and FY15, respectively...Read More
IIFL Institutional Equities maintains add on NTPC
Grasim Ind Q1 FY14 review: IIFL Inst Eq retains buy rating
Reduce Jubilant Foodworks, tgt Rs. 890\share: IIFL Inst Eq
Just Dial Q1 review: IIFL Inst Eq initiates reduce
Crompton Greaves Q1 review: IIFL Inst Eq rates sell
IIFL downgrades OBC to mkt performer post Q1 FY14 results
IIFL Institutional Equities retains buy on PowerGrid
Tata Power Q1 review: IIFL Inst Eq rates buy
Tata Chemicals Q1 FY14 review: IIFL Inst Eq rates buy
Bajaj Electricals Q1 review: IIFL Inst Eq maintains reduce
Glenmark Pharma Q1 review: IIFL Inst Eq rates add
Divis Lab Q1 FY14 review: IIFL Inst Eq maintains add
IIFL maintains buy on Bosch post Q2 CY13 results
GSFC Q1 review: IIFL Inst Eq rates buy
Sun TV Q1 FY14 review: IIFL Inst Eq retains add
PI Industries Q1 review: IIFL Inst Eq reiterate buy
Berger Paints Q1 review: IIFL Inst Eq rates buy
IIFL retains buy on Radico Khaitan, target Rs. 125\share
Cummins India Q1 review: IIFL Inst Eq rates buy
Jagran Prakashan Q1 review: IIFL Inst Eq retains add rating
Tata Motors Q1 PAT at Rs. 17.26bn
Tata Motors' consolidated Q1 FY14 net profit dipped 23.11% year-on-year at Rs. 1,726cr on an 8% YoY growth in revenue at Rs. 46,785cr. The company said strong demand, volume growth, richer product mix and favourable forex movement at Jaguar Land Rover helped offset weak operating environment in Tata Motors' standalone business.
JLR Q1 revenue up 13%
No production loss due to Chakan strike: Rajiv Bajaj
Hero MotoCorp aims 50% mkt share: Reports
Eicher Motors Q2 total income from operations up 50%
Audi India H1 sales up 19%
Atul Auto records 19 % sales growth in July
NMDC Q1 PAT at Rs. 15.72bn
NMDC has posted a Q1 FY14 net profit of Rs. 15.72bn, down 17% year-on-year. Sales for the quarter came in at Rs. 28.69bn, up 1%...Read More
Lanco Infratech Q1 net loss at Rs. 5.79bn
Ranbaxy Laboratories Q2 net loss at Rs. 5.24bn
Lupin Q1 PAT at Rs. 4.01bn
Cognizant Q2 revenue up 7%
GE Shipping Q1 net profit at Rs. 2.74bn
Bosch Q2 net profit at Rs. 2.52bn
Apollo Tyres Q1 PAT at Rs. 1.66bn, up 23% YoY
IRB Infra Q1 cons net profit at Rs. 1.34bn
Karur Vysya Q1 PAT at Rs. 1.2bn
Tata Power Q1 loss at Rs. 1.15bn
PC Jeweller’s Q1 PAT at Rs. 899.5mn
Apollo Hospitals Q1 net profit at Rs. 789.40mn
Tata Chemicals Q1 PAT at Rs. 752mn
Unitech Q1 PAT at Rs. 629mn
Emami Q1 PAT at Rs. 606mn
Spicejet Q1 net profit at Rs. 505mn
Alembic Pharma Q1 PAT at Rs. 470mn
Deepak Fertilisers Q1 net profit at Rs. 427.3mn
Arvind Remedies Q1 net profit up 76%
Puravankara Projects Q1 net profit up 36%
Nitesh Estates Q1 PAT at Rs. 18mn
Bajaj Electricals Q1 net sales up 17%
Radico Khaitan Q1 EBITDA up 16%
Essar Oilfields Q1 EBITDA up 13%
Aptech Q1 operating revenue up 10%
NDTV net loss falls to Rs. 24cr from Rs. 26cr YoY
Zydus Wellness Q1 PAT at Rs. 227mn
Omaxe Q1 net profit at Rs. 190.3mn
Tilaknagar Industries Q1 PAT at Rs. 173mn
Unity Infraprojects Q1 net profit at Rs. 132.8mn
Mandhana Industries Q1 PAT at Rs. 94.5mn
Zee Learn Q1 PAT at Rs. 325 lakh
Kamdhenu posts 39% YoY increase in net profit
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