Market Analysis: Weekly roundup till Jun 10

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Markets
During the week, markets continued to be driven by global news, such as encouraging US retail sales data and expectations of better results from US companies for June quarter lifted the global markets. Sensex gained 2.1 per cent and closed at 17833 during the week, while Nifty ended the week at 5352 were up by 2.2 pc over its previous weekend"s close.

During the week BSE Midcap and Smallcap indices gained 1.8 pc and 2.8 pc respectively. The BSE Consumer Durables and IT, indices gained 5.4 per cent and 4.6 per cent respectively during the week. BSE FMCG and Oil & Gas indices were down by 0.3 per cent and 0.8 per cent respectively.

Going Forward

A few economic readings and the Apr-Jun 2010 quarter numbers for some of the top companies over the week will drive the market. Among economic data, investors will closely watch the industrial production numbers of May 2010 and Jun 2010 wholesale price inflation.

We believe, these data will be the key indicator for RBI in determining policy at its meeting on July 27. On global front, the focus will be on the stress test, which is conducted to know healthy position of the European banks.

Corporate

M&M plans 250 acre aerospace SEZ near BIA
Mahindra & Mahindra plans to set up a 250 acre special economic zone (SEZ) near Bangalore International Airport. The SEZ is expected to be built under public and private partnership model. Karnataka state government is already identified close to 1,200 acres for setting up aerospace SEZ at Devanahalli. Besides Mahindra other companies also showed interest to set units.

BEML is planning to invest Rs 316 crore facility in the designated zone to provide design and manufacturing services in aircraft components, sub assemblies etc.

Dynamatic Technologies plans to invest Rs 450 crore to set up aerospace component unit and Starracheckt Machine Tools also plans to invest Rs 127 crore for aero space component unit.

Bajaj rides on Discover to regain market share
Bajaj Auto, which is high on Discover model, has taken the market share of 9 pc from Hero Honda during the June quarter.

Bajaj market share went up from 25 pc to 34 pc in the Apr-Jun 2010 quarter, where Hero Honda lost 9 pc market share from 56 pc to 47 pc in the same period. Others such as TVS motors and Honda Motorcycles retain their market share.

Discover is the second largest selling brand in motorcycles, overtaking the Hero Honda Passion. If it sustains its momentum it may overtake the market leader Splendor in 3–6 months.

Bajaj is expanding motorcycle capacity by 3,00,000 per annum and from July it will be able to produce 1,70,000 a month of discover bikes. It has also launched a 150cc variant of the bike and hopes to sell 35,000 of these every month.

Economy

Government grants three-year holiday for Oil explorers
The government has granted an additional three years" time to energy firms for exploring oil and gas in 30 deepwater blocks awarded during the first five auction rounds. The move will benefit Reliance Industries (RIL), Oil & Natural Gas Corp (ONGC) and ENI of Italy.

The decision of cabinet committee on economic affairs (CCEA) will give energy explorers more time to complete their exploration commitment. The moratorium would apply to 30 blocks (16 of ONGC, 13 of RIL and one of Italy"s Eni) from Jan 1, 2008, to Dec 31, 2010.

The firms could not meet their contractual obligations due to global shortage of deepwater rigs. At the same CCEA meeting, the Cabinet approved ONGC Videsh"s decision to exit from a gas block in Trinidad and Tobago after its partner Mittal Investment Sarl walked out of the project.

RBI under pressure to up policy rates
Fuel inflation accelerated sharply, negating a moderation in food prices and keeping pressure on the RBI to raise rates further when it reviews the monetary policy on July 27.

The recent increase in fuel prices spurred fuel inflation to an annual rate of 18 pc for the week ended Jun 26, up from 12.9 per cent in the previous week.

This could prop overall inflation to 11 pc in June, despite a marginal fall in food inflation to 12.63 per cent for the week under review from 12.92 per cent recorded in the previous week. Bonds yield did not react much to the inflation number as most market participants expect the RBI to lift policy rates by another 25 basis points in its July 27 review.

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

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