US Stocks saw a decline, with the Standard & Poor’s 500 Index closing down 0.3% at 1,328. This was due to retail sales grew at a 0.3% increase in January 2011 (less than economists’ estimates) as compared to 0.5% increase in December 2010 and prices of imported goods climbing.
Japanese stocks rose for the eighth day, after brokerages raised investment recommendations on some companies and on account of weakening of the yen.
For January 2011, UK experienced a 26 month high inflation rate at 4% YoY as against 3.7% YoY in December 2010.
China experienced a decade high inflation (ex-food) of 4.9% yoy for January’ 2011.
Gold prices rose to a 4-week high. Gold futures for April delivery were at $ 1,373.2 on the COMEX (New York) while it traded at $ 1,372.25 an ounce in London.
India would be signing free-trade pact with Japan today, which would result in removal of trade tariffs on more than 90% of goods traded between the two countries. Through this agreement, India is to provide National treatment to both pre- & post-investments from Japan i.e. Japanese companies investing in India would be treated on par with Indian companies at every stage. This is a positive development for the economy in general and also for the domestic sectors like textiles (on which duties expected to come down from 5%-15% currently to 0-5% at par with Japanese companies), pharma (agreement would allow speedier clearance for exports to Japan) and services in particular.
Buoyed by estimates of robust wheat production (81.47 mn tonnes) for 2011-12, the government is targeting second highest procurement of 26 mn tonnes (YoY up 16%) for FY2011-12; previous record procurement being 25.3 mn tonnes in FY2008-09.
UN joint stock pension fund with a total corpus of $ 42 bn has shown increasing interest for further investments in the Indian stock markets. As of December 31, 2010, the Fund’s investments in the Indian assets were $419mn of which $ 346 mn were in the Indian equities.
Government has disallowed investments by Employee Pension funds (EPF) in the Indian stock markets. This is a negative development as EPF with a corpus of Rs 5 lakh cr would have been in a position to make considerable investments in the Indian stock markets.
Sector Developments:
Oil marketing companies have raised the prices for Aviation Turbine Fuel (ATF) by over 4%. This is the ninth straight increase in jet fuel prices since October 2010.
According to the IATA estimates, India & China will be among the five largest domestic aviation markets in the next 2 years. By 2014, China is expected to have 379 mn passengers (CAGR of 13.9%) while India is expected to have 69 mn domestic passengers (CAGR of 10.5%).
Commerce and Industry ministry has proposed the establishment of a $9 billion-‘revolving fund' with equal contribution from India and Japan to kick start the implementation process of the $100-billion-Delhi Mumbai Industrial Corridor Project.
Corporate Developments:
The Environment Ministry's move to ease restrictions imposed on mining projects in critically polluted areas such as Chandrapur and Korba would help Coal India Ltd increase its output for FY2012 by about nine million tonnes (~2%).
Tata Steel Q3FY2011 consolidated net profit was up 122% at Rs.1,003 crore as compared to Rs.473 crore in Q3FY2010, on a yoy basis. Consolidated net sales were up 9.74% at Rs .28,610 crore against Rs.26,070 crore on a yoy basis. The increase was mainly due to improved product mix and higher output
Jindal Steel and Power‘s integrated steel plant in Orissa has received a conditional approval from the Ministry of Environment.
Our Views:
Sensex continued its uptrend yesterday (rising by 72 points) to close at 18,274 amidst volatility. FII’s were net buyers to the tune of Rs 233.05 cr in the equity markets while DII’s sold equities worth Rs 167.85 cr. An analysis of Nifty50 stocks for the quarter ended December’2010, suggests companies have reported rise yoy in sales by 18%, while EBITDA and PAT have risen yoy by 22% & 30% respectively while interest cost is up by 17% yoy. This suggests the fears of rising raw material prices and interest costs are over done and we believe that the domestic companies would continue to do well during Q4 FY11 as well. Though the markets may remain volatile till the budget day, we remain optimistic on the Indian growth story and continue to advice accumulating value stocks like Super Spinning, Indian Bank, Dhanalaxmi Bank, BHEL, etc, with a time-frame of 6-12 months.
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