Market Analysis: Weekly roundup till Dec 12

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Investors were in no mood to extend their commitments at the current levels and booked profits at the intra-day higher levels despite of sustained capital inflows into equity.

Reserve Bank of India Governor D Subbarao clarified that the central bank has no plans to curb foreign fund inflow at the movement. Concerns about raising inflation made investors cautious.

Sensex Gained 18 points and closed at 17119 over its previous weekend"s close, while Nifty ended the week at 5117 netting a gain of 8 points over previous weekends close.

During the week BSE Mid-cap index lost 0.4 per cent, while Small-cap index gained 1.5 per cent. Week"s top gainers were Consumer Goods and IT indices by 4.0 per cent and 2.2 per cent respectively.

Going Forward
Indian markets are expected to track on global news. The latest EPFR Global data on global fund flows suggests that emerging markets received 2.3 billion dollars would be improve the sentiment.

We believe that correction is not ruled out before another round of consolidation in the broader indices.

Volumes are also expected to be low on the back holiday season, which kicks in the west.

Corporate

L&T plans Rs 400 crore engg SEZ at Hazira
Larsen & Tubro (L&T) will set up its heavy engineering SEZ at Hazira in South Gujarat, with an investment of Rs 400 crore.

The Company has acquired 136 hectares in Surat. L&T will also set up another three projects in the vicinity of SEZ which are super critical steam turbine and generators for conventional thermal power plants.

It will also manufacture super critical builders for engineering auto and ceramic industries.

L&T MHI Turbine Generation, a subsidiary of L&T will manufacture super critical steam turbines and generators for conventional power plants with an investment of Rs 1030 crore.

Another project the company will involve manufacturing of super critical machines for engineering, auto and ceramic sectors with an estimated investment of Rs750 crore.

The third project with an investment of Rs 250 crore will involve casting related work for power plant and other heavy equipment.

OVL plans to set up refinery in Nigeria
ONGC Videsh (OVL), the overseas investment arm of state owned ONGC plans to set up a Greenfield refinery in Nigeria.

According to Oil ministry sources, OVL wants to set up a 1,80,000-barrels per day refinery in collaboration with Lakshmi Mittal.

The proposed investment is part of a deal being worked out where Indian companies would also be given oil blocks in Nigeria.

He further added, India was keen to expand import of liquefied natural gas (LNG) from Africa to meet its increasing requirement of gas.

India is a stable, long-term and growing market for Africa"s natural gas. Indian companies are also interested in sourcing LNG as well as equity participation in existing and upcoming LNG terminals in Africa.

UB strengthens hold over the beer market
United Breweries Ltd (UBL) Heineken NV, agreed to permit UBL to brew and market the Heineken brand in India. Heinken brand is likely to be launched by the beginning of the summer season of 2010.

Heinken will be sold through the same UB network as distribution of beer and liquor is common.

Heinken use its global distribution system to market the Kingfisher brand in overseas markets.


Economy

Industrial Output grows by 10.3 pc
Industrial output grew by 10.3 per cent in Oct 2009 versus Oct 2008. This is lower- than market expectations, and sowing seeds of doubt about the robustness of India"s economic recovery.

The broadbased revival in manufacturing with a 11.1 per cent increase in factory output — manufacturing is one of the three components of the index of industrial production (IIP) — failed to satisfy the stock market, which pared early gains and slipped into negative territory after the IIP data were released.

Industrial production grew by 11 per cent in Aug 2009, its fastest pace in 22 months, and it was followed by a 9.1 per cent increase in Sep 2009 on a high base.

Industrial growth in Oct 2008 was almost flat at 0.1 per cent, exaggerating the rate of expansion in Oct 2009.

At 290.1, IIP was at a five-month low, explaining the disappointment of market players who had built up higher expectations on anecdotal evidence of a strong pickup in sales of manufactured goods, led by automobile sales that grew by 61 per cent in Nov 2009. Sixteen out of 17 manufacturing sub-sectors reported a positive growth in Oct 2009.

The healthy 12.2 per cent growth in capital good output suggested a revival in the investment activity while the 14.3 per cent increase in output of intermediate goods, suggested strong manufacturing in the coming months.

Food inflation at a decade high
Food inflation climbed to 19.05 per cent for the week ended Nov 26, its highest level in a decade, from 10.48 per cent in 2008. It last crossed 20 per cent in 1998.

If inflationary pressure persists for a long time, it can fuel inflationary expectations and monetary policy will have to take a nuanced view on this.

Consumers are feeling the pinch at the retail end as prices of products such as urad dal, sugar and peas are being sold at almost double the rates in 2008.

Food price inflation, which is generally attributed to supply-side pressures and not amenable to management through policy action, may be returning to haunt India.

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

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