Market Analysis: Weekly round up till May 21

Benchmark indices closed below their psychological levels of 17000 and 5,100 respectively. Sensex lost 3.2% and closed at 16445 during the week, while Nifty ended the week at 4931 losing by 3.2% over its previous weekends close.

During the week BSE Mid-cap and Small-cap indices lost 3.7% and 4.5% respectively. BSE Consumer Goods index was the sole gainer, up by 1.2% during the week. BSE Realty and Metal indices were the top losers down by 8.8% and 6.5% respectively.

On global front, sentiment continued to be hit by concerns about the Europe"s debt crisis and unexpected increase in US jobless spook the markets during the week. Fears are growing that Europe debt crisis downturn the global growth.

Going Forward

Markets are likely remain choppy this week and much will depend on how world markets react to credit crisis in Europe. As per the market experts, US treasury secretary Timothy Geithner"s mid-week visit to Europe will further destabilize the markets. On Domestic front, markets remain volatile ahead of the F&O expiry of May Series on Thursday, May 20.

Corporate

Ambani Brothers end war but agree to compete

The Ambani brothers have cancelled all existing non-compete agreements between their groups, drawn-up during the Reliance re-organization in 2006. The new agreement opens up the opportunities to sectors that were out of bounds for either groups, such as telecommunications and the financial sector for the older brother Mukesh. Gas-based power generation continues to be off-limits for RIL up to March 31, 2022. An appropriate exception has been made in respect of RIL's captive gas-based power plants. For Anil, the doors are opened to enter into the Oil & Gas and Petro chemical sectors.

ABB to up stake in India arm with Rs 900/share open offer

Parent company of ABB announced an open offer to acquire 22.8% in its Indian Subsidiary ABB India at Rs.900 per share. The open offer will commence on July 8 and close on July 27. HSBC Securities and Capital Market are the Lead Managers. ABB will be spending Rs.4,365 crore to raise its stake in the Indian arm to about 75 per cent from the current 52 per cent.

Institutional investors hold substantial stakes in ABB India and their willingness to tender their shares would be crucial to the open offer's success. LIC holds around 16 per cent in ABB India, and Aberdeen Investment 3.5 per cent.

L&T beats street estimates, net profit jumps 44%

Larsen & Toubro (L&T) reported a 90 per cent jump in standalone net profit for the March quarter,2010 at Rs.1,438 crore, as compared to Rs.758 crore in the December quarter,2009. The revenues of the company grew 68 per cent to Rs.13,585 crore from Rs.8071 crore on sequential basis. The order inflow grew 90 per cent, that is, by Rs.23,843 crore, in the January-March quarter. The numbers are above the market expectations. For the financial year ended 2009-10, L&T"s consolidated revenues grew 8.5 per cent to Rs.44293 crore and its annual net profit grew 43 per cent to Rs.5,450 crore. The company's order book grew 35 per cent to stand at Rs.1,00,239 crore. The company also posted an all-time high Ebitda margin for the year, at 13 per cent. This growth in Ebitda margin is due to the low commodity prices for the major part of the last year.

Jindal Steel acquires Oman's Shaheed Iron for $464 m

Jindal Steel and Power Ltd (JSPL) completed the acquisition of Oman-based Shadeed Iron and Steel Co LLC (Shadeed). The acquisition was completed for $464 million, which includes the assumption of liabilities was carried through by JSPL's 100 per cent subsidiary, Jindal Steel and Power (Mauritius) Ltd.

To fund the acquisition, JSPL has tied up $400 million in debt financing from international banks while the rest of the amount would be from internal accruals. The Shadeed facility is engineered by Kobe Steel (Japan) and Midrex (US), which are among the global leaders in the field of direct iron technology. Shadeed is also installing 1.5 million tonne a year gas based hot briquetted iron plant at Sohar Industrial Port area of Sohar, Oman.

Economy

Govt to raise Rs.67,000 crore from 3G

The third generation (3G) spectrum came to an end today with leading operators Bharti Airtel, Reliance Communications and Aircel winning licenses for 13 circles each. No single operator could garner enough cash to win bids for all the 22 circles that went under the hammer. Bharti bid the highest, Rs.12,295 crore, for 13 circles. Bharti Airtel, Reliance Communications and Aircel emerged as the big boys with each netting 13 circles in its kitty, including the most lucrative Delhi and Mumbai circles. Idea Cellular followed with 11 circles, Vodafone Essar and Tata Teleservices got nine circles each, and Stel secured three circles. Videocon and Etilasat DB failed to win a single circle. While Vodafone-Essar will pay Rs.11,617 crore for nine circles, Reliance Communications will pay Rs.8,585 crore. However, government has emerged as the biggest winner. The sale of airwaves has generated Rs.67,719 crore, the double of what it had targeted in the Union Budget this year and about 1 per cent of the country's gross domestic product. The auction of broadband wireless access spectrum (BWA) is to begin in two days is expected to gain more. The proceeds from the sale of 3G and BWA spectrum will together help the government plug its fiscal deficit, projected at 5.5 per cent of GDP in the Budget.

(An article by DAS CAPITAL MANAGEMENT AND ADVISORS Pvt. Ltd)