Weekly JournalEconomy (Global)
US wholesale prices unexpectedly dropped in April by 0.1% following a
0.7% increase in March. Excluding food and fuel, the core prices climbed 0.2%, compared to 0.1% gains in March. Consumer prices fell to 0.1% in April, signaling the world’s largest economy is recovering without causing prices to flare. Excluding food and fuel, the core rate rose 0.9% in April YoY after a 1.1% gain last month. Gasoline prices fell 2.4% in April. Food prices, which account for15% of the CPI, rose 0.2%. Manufacturing expanded at a slower pace in May as the general economic index fell to 19.1 in May from 31.9 in April. Japan’s onsumer sentiment rose as the benefits of an export-fueled recovery continued to spread to households. The confidence index climbed to 42 in April from 40.9 in March. Japanese machinery orders advanced 5.4% in March from February.
U.K’s consumer prices rose 3.7% (forecast a 3.5%) from a year earlier,
compared with a 3.4% increase in March. With inflation above the overnment’s upper limit of 3%, the Bank of England is expected to take tightening monetary measures to contain peaking inflation. Exceeding forecast the housing starts rose by 41% in April to 672,000 YoY. Building permits, which are considered a leading indicator for homebuilding, fell 12% in April to a 606,000 annual rate. England posted its largest April budget deficit to 10 billion-pound (USD 14.4 bn) shortfall compared with 8.8 bn pounds a year earlier. Spain approved the public wage cuts and reduced its economic growth forecast for next year as the government tries to tame the euro region’s third-largest budget deficit. Gross domestic product will grow 1.3% in2011, less than a previous projection for 1.8%, and the government said the deficit will narrow to 6% of GDP next year from 11.2% in 2009. Wages 
for government workers will drop 5% in June.
Commodities and Currencies
Gold prices fell to USD 1,176.10 an ounce on the Comex in New York, capping the biggest weekly loss. The metal declined 4.2% this week. Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, remained unchanged at 1,220.15 metric tons. Crude oil fell as
European governments struggled to contain the region’s debt crisis. Crude oil for July delivery dropped to USD 70 a barrel on the NYMEX. rices slipped 7.1% this week.
Indian Economy
Imports surged by 43.3% to USD 27.3 billion in April, indicating that the domestic industry was consuming more and its output could grow. Factory production has also been rising steadily, with a 13.5% growth for March and 10.4% for FY10. Exports were up 36.2% to USD 16.9 bn in April, but this was more due to low base effect than a healthy demand revival, year-ago exports numbers were at USD 12.4 bn. Exports of engineering goods and textiles went up by 16% and 30%, respectively. Petroleum products exports grew by 80% in April YoY. India's food price index rose 16.49% in the year to May 8, while the fuel price index rose 12.33%. Food prices inched up compared with the previous week's annual rise of 16.44%, while fuel prices held steady. The primary articles index was up 16.19% in early May, compared with the previous week's annual reading of 16.76%. India's government borrowing could be lower by INR 350 Bn (USD 7.6 Bn) in the FY11 from earlier estimates of INR 4.57 Tn (USD 99.3 Bn) on higher third-generation spectrum sale inflows. Because of which the fiscal deficit 
may slide to 5%, from the projected figure of 5.5%. Economic growth forecast for the FY10 is likely to be revised upwards to7.5% from 7.2% due to better industrial output growth in the March quarter and agricultural growth. The textile exports to the US are finally back on track, recording growth in February and March. Textile and apparel exports to the US rose 8.3% y-o-y in March to USD 487.8 Mn. Exports increased 7.7% y-o-y to USD 443.5 Mn in February. Apparel exports to the US, however, posted a modest 2.8% growth in March to USD 315.1 Mn. Demand has started to pick up in the US.The bookings are quite reasonable and (trade) enquiries have also been quite good.
Indian Debt Markets
The yield on India's 7.80% 10-year benchmark bond ended at 7.38% from 7.50% a start of the week. The government sold three bonds worth INR 130 Bn (USD 2.8 billion) on Friday.
Indian Currency Movement
The Indian rupee posted its biggest weekly decline in nearly 14 years as domestic shares extended losses while concerns remained over the euro zone's growth prospects. The partially convertible rupee closed at 46.95/96 per USD. Over the week the rupee dropped 3.8%. The rupee has lost 5.5% so far in May due to the outflows, and is down 0.9% in the year to date.
Global and Domestic Stock Markets
Global
Major U.S. markets closed lower for the week. The S&P 500 closed down and the Nasdaq edged lower for the week. The Dow also fell by 4.0%. European and Asian markets also tumbled on fears of further deepening in Euro debt crisis as Germany banned short selling. Crude traded near the $69-70 level. Gold touched high of $1,242 but fell to $1177 level. On the economic front, new housing starts in April were up about 7 percent from March, coming in at 672,000. On the news front, Germany's parliament approved a law allowing it to contribute to the 750 bn euro debt rescue package to protect the euro zone. US economic data to watch out in the next week: GDP Price Index, Initial Jobless claims, Personal Spending, Personal Income.
Domestic Performance of Sectoral Indices
The domestic markets also saw sharp corrections during the week over the Euro debt crisis. Nifty and Sensex closed 3.2% down with heavy selloff from FIIs. Among the BSE sectoral indices, FMCG (-10.32%), Realty (-8.82%), Metal (-6.49%) were the worst hit, while only CG (+1.2%) was the major gainer. ABB was the major gainer as it made open offer at 900, while Aban lost further during the week after the Venezuela accident. FIIs and MFs remained net sellers in this week also. Data to watchout in next week: Primary Articles WPI, Fuel Power Light WPI.
Outlook
The domestic market lost ground in line with the international markets. Concerns over the handling of euro zone issue led to weakness in commodities and equity markets. On the domestic macro front, however things were better. The government has collected more than anticipated in 3G spectrum. Govt pronouncements on infrastructure funding are also positive. Change in gas prices was a positive move and this has led to expectation that Government may also act on the oil price deregulation. Larsen came out with strong numbers and gave a fairly solid guidance for next year as well. ITC results were better than expectation. The Piramal Healthcare deal with Abott is bound to generate interest in the Pharma space while the BOR-ICICI deal will keep market participants interested in mid cap banking space. German parliament approved Euro Aid package and that may help bring back some stability in the euro in short term which in turn may bring some pull back in commodities which have seen a sharp unwinding.
Conclusion
Nifty closed below the 200 DMA but did not close below the 200 DEMA levels. Any pull back above 200 DMA will result in a sharp pull back rally. Some support has come into international markets also around the 200 DMA levels. FTSE has support around 5000 levels while Dow finds support around the 10000 levels. Sectors like metals, realty were in oversold territory and saw some bounce from important support levels There could be some more pull back in metals, auto and realty stocks. Sterlite, Hind Zinc, Tata Steel, Tata Motors could see some pull back. In the mid cap space, stocks like Petronet, SREI Infra were some of the stocks which look set for more gains. In the momentum pack, IFCI did see swift recovery from lows suggesting buying interest in the same. Hurdles for Nifty will be around 4970-5020-5050-5150 and short term supports is seen at 4890-4840 levels. Nifty is likely to trade in the following range in the coming week:
Short term Support: 4890/4840
Short term Resistance: 4970/5020/5050
Sector & Company Highlights
Infrastructure & Capital Goods
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The government proposes to raise FDI in defence production to 74% (currently 26%), to ensure technology transfer and funds to effectively
replace imports, estimated at over $8 bn.
McNally Bharat Engineering Company Ltd has received the orders worth INR 271.8Mn.
Thermax has signed a technology transfer agreement with German firm Lambion Energy Solutions in the area of energy generation from waste. The technology transfer will enable Thermax with high efficiency combustion systems for using biomass, high in moisture content, for
energy generation. This technology will be integrated with boilers and heaters made by Thermax with a capacity range of 4-30 MW. hermax will have an exclusive license to market heating systems in India and south Asian countries, South East Asia, Middle East and Africa.
IL&FS Transportation Networks Ltd has emerged as the lowest bidder (50:50 JV with Ramky Infrastructure Ltd) from NHAI for Four Laning of Jorabat - Shillong (Barapani) in the State of Assam & Meghalaya on Design, Build, Finance, Operate and Transfer (DBFOT) pattern. The Project is on Annuity basis with a concession period of 20 years including a construction period of 3 years. The estimated cost of the Project is INR 5.36bn. The Company shall receive a semi-annual Annuity of INR 725.1Mn.
GMR Infrastructure is hoping to tie up funds (at 10.5 – 11%) for its newest highway project by the end of next month. The INR 17bn, 99 km national highway runs between Hungund and Hospet in Karnataka. GMR bagged the project in February along with New Delhi-based Oriental Structural Engineers (51:49). The project is on build-operate-transfer (BOT)-toll project with a concession period of 20 years. The roject would have a debt-equity ratio of 70:30.
IRB Infrastructure Developers Ltd has received Letter of Acceptance from NHAI for a project based on Design, Build, Finance and Operation of Six Lanning of Tumkur - Chitradurga (114 km) in the state of Karnataka.
Shriram EPC won two orders worth INR 1250Mn from Prakash Industries Ltd and a Bangalore-based utility.
Elecon Engineering has been awarded order worth INR 327.7Mn from Manikgarh Cement Unit-II for design, engineering, manufacturing,
testing, supplying, erectioning and commissioning of Material Handling Equipments and other Equipments
Cement
Cement prices have already begun to fall across region in the country and are further expected to soften by over 10-15% during 1HFY11 owing to dual effects of over-supply and lower demand (on the back of set of early monsoon).
Shree Cement is considering to foray into solar power sector and set up plants to generate 50Mw in Rajasthan at a cost of INR 7.5bn. Company will use its present cash surplus ofINR 20bn to fund the proposed venture.
Reality
Godrej Properties Ltd will launch new projects across 4 cities in FY11, totaling 15 million square feet, taking its presence to 10 cities cross the country. The new projects would be launched in Mangalore, Chennai, Kochi and Hyderabad. These would be residential properties, including affordable and mid-income.
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Oil & Gas
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Indian Government has increased the dministered Price Mechanism (APM) price of gas from the present INR 3,200 per thousand cubic metres (TCM) to Rs 7,500 per TCM. The new price would be pplicable to small consumers and Supreme Court-mandated industrial units in and around Agra and Ferozabad as well as for compressed natural gas (CNG) that is pumped into local transport bus.
Cairn India is planning to ramp up production at its Mangala oil fields (to 125,000 bopd) after laying a pipeline which will enable it to sellmore oil to refiners.
Power & Power Equipment
Power Grid Corp. of India Ltd (PGCIL) plans to float tenders valued at around Rs 640 Bn in 2010-11 for nine high-capacity corridors that will transmit power from new projects in Orissa, Sikkim, Jharkhand, Chhattisgarh, Madhya Pradesh, Andhra Pradesh and Tamil Nadu.
Tata Power Co. Ltd on Wednesday moved the Bombay high court against the Maharashtra government’s decision asking it to continue supplying power to rival Reliance Infrastructure Ltd, or R-Infra, at regulated rates.
Power tariff would go up by about Re 1 per unit (kwh) owing to the government's decision to hike gas prices last evening. The government raised natural gas prices by more than double -- to USD 4.20 per mmBtu.
Satluj Jal Vidyut Nigam expects annual net profit to touch Rs 9000 mn ($194 million) after the fiscal year 2012/13 on start of new projects, its chairman said on Thursday. The company sees annual net profit at Rs 7500 mn till the year ending in March 2013.
ABB on Monday offered 965 million dollars (785 million euros) to increase its stake in its Indian subsidiary. If the offer of 900 rupees per
share is accepted by shareholders of the Indian subsidiary, ABB Limited, the engineering group's stake in its subsidiary would increase from
52 per cent to 75 percent
Pharma
Abbott will make an upfront payment of USD 2.12 bn & annual payments of USD 400 mn for next 4 years for acquiring Piramal’s domestic business. Abbott is expecting transaction to get over by H2 of 2010
Dr Reddy's Laboratories announced the launch of Tacrolimus capsules, used to prevent rejection of kidney and liver transplants, in the US
market
Elder Pharmaceuticals, which has just developed its first innovative nutraceutical drug whose chemical name is ‘coenzyme Q10’ will help
to build immunity against cardiovascular diseases, neurogenerative diseases like Parkinson’s and Alzheimer’s, migraine, hypertension and
diabetes.
Ranbaxy Laboratories Ltd said its European unit was recalling select batches of three products to add safety warnings under the
regulations there
Stride Arcolab has received a tentative approval from US health regulator Food and Drug Administration (FDA) for generic drug abacavir
sulfate tablets, which are used against HIV infection
Auto
Hindustan Motors plans to double manufacturing capacity at Thiruvallur plant near here by 2012 end. The Thiruvallur plant has a capacity
of 12,000 units and two years down the line, capacity would be doubled to reach 24,000.
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Maruti Suzuki India is planning to launch a new version of its small car Alto, the highest selling model in India, with a bigger engine. The company has also appointed Japanese firm Nippo as its consultant for developing a test track at Rohtak, in Haryana, where its research and
development centre is being set up at an investment of INR 15 bn.
Tata Motors is in talks with Metalsa SA de CV to manufacture its cars in Mexico. If the talks are successful, the Mexican firm will make the Indica Vista hatcback, Indigo Manza sedan and the ultra-cheap Nano under a contract manufacturing arrangement.
Metal/Mining
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Jindal Steel and Power has acquired Shadeed Iron & Steel for USD 464 mn. The Oman-based steel company has 1.5 MT Hot Briquetted Iron (HBI) facility located in Sohar, Oman. The acquisition is part of the domestic firm's plans to expand its operations overseas.
Visa Steel expects INR 1.8-2 bn revenue and expects to maintain operating margins at 17% in FY11. The company will invest INR 4 bn for capital expenditure for which funds have already been raised at a debt/equity ratio of 65:25.
Steel Authority of India (SAIL) is in advanced stages of discussion to set up a steel making facility in Jharkhand in a joint venture with Posco. The two firms are also planning to set up a specialised steel mill in Maharashtra.
Essar Steel will commission the first phase of its INR 130 bn expansion project by the end of next month. The first phase of expansion (1.8 MTPA) will be commissioned by the end of next month.
NMDC will seek a 90-100% jump in prices for supply of iron ore to Japanese and South Korean steel mills for the current quarter over the previous contractual rates. The company had last year entered into pact to supply iron ore lumps to these mills at around USD 71/tonne and iron fines at USD 61/tonne.
Media
Sahara One is set for a big change. From packaging to renewed initiatives in programming, the channel promises its viewers a fresh and
new exposure keeping in mind the changing tastes. This year they plan to launch 6 to 7 shows.
Reliance MediaWorks, part of the Reliance ADA group, is training a small army (2,700) of artists to make 2D pictures into 3D in the next year, to meet the rise in demand for 3D films following the huge success of James Cameron's "Avatar" and other films.
Reliance MediaWorks, with two other group firms, has acquired an additional 1.89 lakh shares and raised their stake in multiplex chain
Fame India Ltd to 14.51%, as it battles rival Inox in a takeover bid
Source: Bloomberg
whereas the margins for the year saw a dip of 142 bps. This was mainly due to dip in revenues for the quarter and an increase in the company’s operating expenses, which increased by 4% for the quarter, YoY.
