Market Analysis: Weekly roundup till Oct 1

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Market Analysis: Weekly roundup till Oct 1
The Bombay stock exchange Sensex touched the Psychological mark in a brief three session week, riding on strong liquidity situation. But valuations continued to worry the players.

In this week the Sensex gained 441 points and closed at 17134. While, Nifty gained 124 points and closed at 5083.

Foreign Institutional Investors, which remained positive about India"s growth, were the heavy buyers in the last month by Rs.18344 crore. The trading volume on BSE and NSE was relatively high at Rs.18248 crore and 55385 crore respectively.

Banks and IT stocks saw hectic buying and supported its indices to gain by 5.3 per cent and 4.5 per cent respectively.

Going Forward

We believe Optimism about stronger Sep quarter results would help markets to reach higher levels. We further believe markets will keenly observe the announcement of Infosys results on Oct 9.

Reasonably good debut of Oil India on the bourses may give a fillip to the government divestment plans. FII invested 2600 crore in Oct 2009

We believe this trend will continue by FII"s and this will keep indices steady at current levels.

Corporate

Bharti-MTN deal dead on dual listing
Bharti Airtel and the MTN have called off their merger talks. This is the second time in less than two years that both the companies have called off a proposed transaction.

The South African government"s refusal to soften its stance on the dual listing structure brought the deal to an end.

The deal fell through after two crucial meetings in South Africa, one where the key representatives of the government expressed reservations about the deal and refused to budge from its earlier stance on dual listing of companies.

Videocon to buy stake in Elcoteq
Consumer durable and Oil Company Videocon Industries has reached a preliminary agreement to buy an equity stake in Finnish electronics firm Elcoteq for about 72 million dollars.

The announcement came just two days after Elcoteq called off a similar deal signed in July with China"s Shenzhen Kaifa Technology.

Loss-making Elcoteq aims to conclude negotiations soon and close the deal by the end of the year. Elcoteq operates in 15 countries and also has a facility in India at Bangalore.

Last year, it suffered a net loss of Euro 66 million on sales of Euro 3.4 billion.

Domino's Pizza plans for IPO
The Indian franchisee, Domino"s Pizza plans to come up with an initial public offering (IPO).

It will allow private equity investor JP Morgan, which owns 33% in the company, to exit the fast-food chain. Delhi-based Jubilant Group owns 67 per cent stake in Domino"s Pizza India, which will become the first restaurant chain in the country to be traded publicly if the share sale goes through.

The chain"s parent, US-based Domino"s Pizza, doesn"t hold a stake in its Indian franchisee. JP Morgan is looking at exiting Domino"s Pizza through the primary market route as it has been unable to find a buyer at the valuation it wants.

In 1999, Indocean Capital, an affiliate of JP Morgan Partners, had picked up a 25% stake in Domino"s Pizza India, which was subsequently increased to 33 per cent.

Economy

Inflation for food articles inches up
The wholesale price-based inflation for the week ended Sep 19 rose to 0.83 per cent from 0.37 per cent in the previous week on the back of costlier food items.

Inflation in food articles for the week under consideration was at an eleven year high of 16.32 per cent, causing some concern in the government.

With more than 40 per cent of India"s districts declared drought hit, the high inflationary expectations have pushed up prices of food articles. But according to economists and agri-commodity analysts the prices of food items should start moving down as the kharif produce (summer crops) comes to the market in coming weeks.

Trade shrinks in Aug 2009
Both the exports and imports tumbled down for the straight eleventh month in Aug, which is triggering worries among exporters. Exports fell 19.4% in August 2009 to 14.3 billion dollars from a year earlier, but at a lower rate than in the previous four months of the fiscal.

Imports for the month slumped 32.4 per cent to 22.6 billion, dollars as per quick estimates released by the commerce department. India"s export target for the year ending March 2010 is 200 billion dollars which trade bodies have said will be difficult to meet.

In the first five months of the fiscal, exports declined 31 per cent to 64.12 billion dollars, from 93 billion dollars a year earlier.

Fiscal gap widens further
The country"s fiscal deficit—the gap between receipts and spending that is usually financed through borrowings—rose 35 per cent in the first five months of the fiscal compared to the same period a year ago as the government continued with tax cuts and higher public spending to boost the economy.

Fiscal deficit in the Apr-Sep period stood at Rs 1,82,290 crore, which is 45.5 per cent of the budget estimate for the current fiscal.

In the same period a year ago, it had scaled 87 per cent of the budget estimate and the government had to revise the annual fiscal deficit from a target of 2.5 per cent to 6 per cent as the economic downturn prompted it to step up spending and cut taxes.

(An article by DAS CAPITAL MANAGEMENT & ADVISORS Pvt Ltd)

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