Market Analysis: Weekly roundup till Aug 21

Sensex gained 1.3 per cent and closed at 18,401 during the week, while Nifty ended the week at 5,530 were up by 1.4 per cent over its previous weekend"s close.

During the week BSE Mid-cap and Small-cap indices outperformed the Benchmark indices were up by 2.3 per cent and 1.7 per cent respectively. The BSE FMCG and Bankex indices were up by 2.9 per cent and 2.7 per cent respectively, during the week, where BSE Consumer Durable index was the sole loser by -0.2 per cent.

Going Forward

Markets should be volatile for the week on the back of expiry of the August series equity derivatives on Thursday. Market participants will watch closely for trends in the rollover of Aug derivative contract to Sep, to get a sense on market direction in Sep 2010.

The outcome of US economic readings such as home sales for July and initial jobless claims in August will have a bearing on the sentiment in global markets.

Corporate

Tata Steel capacities to jump three fold

Tata Steel domestic manufacturing capacity will increase by three fold to 21 million tonne per annum through the expansion of its Orissa and Chhattisgarh Greenfield units becoming operational.

The Company is setting up a 6 million tonne per annum Greenfield steel plant at Kalinganagar in Orissa and 5 million tonne green field integrated steel plant at Bastar in Chhattisgarh.

The company already placed the orders for equipment for Orissa project, which is expected to be on-ground in 3-4 years. The company will construct this project in two phases and it is focusing on land acquisition, rehabilitation and resettlement of the people.

Tata Steel plans to invest Rs 4500 crore this fiscal followed by Rs.7000 crore in 2011-12 for various projects, on the back of increasing demand for steel business from auto, construction, and infrastructure sectors.

Vedanta to buy 60 pc in Cairn India for $9.6 billion

Vedanta Resources agreed to buy as much as 60 per centof Oil & Gas explorer Cairn India. The London listed Vedanta would pay a total of about $8.5-$9.6 billion for Cairn India along with mining unit Sesa Goa.

Vedanta Resources proposes to buy 40 per cent of the company from Cairn UK at Rs 405 a share including Rs 50 non compete fees per share. Sesa would offer to buy 20% minority Cairn India share holders stake at Rs 355 a piece.

Vedanta raise $6.5 in debt led by Standard Chartered bank, for the deal. The deal may be closed by 2011 first quarter.

Investors will be looking for reassurance that this deal will not endanger the Company"s impressive organic growth profile. Cairn India, the second biggest private refiner in the nation produces 1,25,000 barrels oil a day from fields of Rajasthan.

Economy

Govt fixes price of blending ethanol at Rs 27 per litre

The government has given a formal approval to the introduction of 5 per cent ethanol blending at a price of Rs 27 per liter.

The government also approved the formation of a working group of officers that will be in charge of ascertaining the availability of ethanol and recommend the petrol –ethanol blend percentage in the states and Union Territories upto a limit of 10 per cent.

Inflation drops to 9.97 per cent in July 2010

The wholesale inflation rate came down to 9.97 per cent in July 2010, primarily due to decline in prices of food articles during the month. It was at -0.5 per cent in the corresponding month in 2009 and at 10.5 per cent in May 2010.

In July, the inflation rate for the primary article category rose by 1.9 per cent on a monthly basis, while it was up 15 per cent on a yearly basis. Food price inflation eased to 10.3 per cent on a yearly basis in July against 14.6 per cent in June 2010.

The fuel component rose by 3.2 per cent on a monthly basis and the annual rate of inflation stood at 14.3 per cent. The inflation rate for the manufactured products category registered a monthly decline of 0.1 per cent, while the annual inflation rate stood at 6.2 per cent.

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