Market Analysis: Weekly roundup till Aug 28

Sensex lost 2.2 per cent and closed at 17991 during the week, while Nifty ended the week at 5,408 were down by 2.2 per cent over its previous weekend"s close. During the week BSE Mid-cap and Small-cap indices were down by 2.4 per cent and 1.1 per cent respectively.

The BSE Consumer Durable index was the sole gainer among sector indices by 1.4 per cent where BSE Realty and Metal indices were lost by 8.5 per cent and 3.3 per cent respectively.

On Friday, Aug 27 US stocks rose 1 per cent to close above the psychological 10,000 mark. As per Barclay"s capital report, US industrial production has been growing significantly higher than the GDP.

Going Forward

Domestic stocks may open firm this week on the back of strong close in US markets on Friday despite a downgrade in the economy"s second quarter growth.

Investors will closely watch the economy"s gross domestic product reading for the April-June quarter on Tuesday, may have a bearing on the Reserve Bank of India"s monetary policy decision in September.

Even if the GDP growth data springs a surprise, gains in indices are likely to be limited from these levels. Higher than expected economic growth raises the profitability of sharper rate hikes by the central bank.

Corporate

Maruti plans 3rd Manesar unit, may invest Rs 1,700 crore

Maruti Suzuki India is planning to set up a third production unit at its Manesar facility that would require an investment of Rs 1,700 crore. The unit is proposed to have a capacity of 2.5 lakh units annually.

The Company"s Manesar plant has an annual production capacity of 3 lakh units, while Gurgaon unit produces 7 lakh units per annum. The Company stated that the Indian car market is likely to double to 5 million units by 2015. The Company needs to be prepared to meet the growing demand in order to sustain its leadership position.

M&M bets on Ssangyong buy to make it global force

Acquisition of South Korean Ssangyong Motor would help the Mahindra & Mahindra (M&M) to emerge as a global force in sports utility vehicle market. Ssangyong brings the legacy of R&D and innovation into M&M. It signed a MOU in Seoul to acquire Ssangyong. As per the industry experts the cost of acquisition could be around $500 million.

Ssangyong has a debt of $640 million, where M&M had earlier announced that, it will acquire a debt-free company. M&M has cash reserves of more than $500 million.

Its debt-equity ratio stands at 0.3% among the lowest in the industry. Post the acquisition M&M will focus on alternative fuels and electric vehicles will further strengthen Ssangyong"s brand value and will take it to new geographies.

Tata Power may buy 50pc stake in Intergen

Tata Power is in talks to buy 50 per cent stake in Power utility InterGen NV. It is negotiating to acquire the stake from GMR Infrastructure Ltd.

Atleast four companies are competing for the stake with China Huaneng Group. InterGen would add revenue from 12 power plants in the UK, Netherlands, Mexico, Australia and the Philippines.

GMR Infrastructure has bought 50 per cent of InterGen in 2008 for $1.1 billion from a fund owned by American International Group Inc.

The rest is owned by Ontario Teachers Pension plan. According to the company filings, Tata Power has Rs 7.5 billion of cash and Rs 15.6 billion in short term investments.

Economy

Wary of Inflation, RBI vows policy action

Central Bank of India has sounded a note of caution on Inflation. It said inflation has persisted this year even though the downside risks to growth were very much lower. It reiterated its commitment to containing inflation through monetary policy actions, while assessing risks to both inflation and growth.

The impact of deficient monsoon on growth is weakening. Whereas the impact on inflation continues to be significant. It also stated that identification of sources, of inflation is important for the conduct of monetary policy. In its July policy review, RBI has raised its growth forecast to 8.5 per cent from the earlier 8 per cent with an upward bias.

It has also raised its inflation projection to 6 per cent by March, compared with 5.5 per cent in April. It has also cautioned on the capital inflows into the country, indicating it may pose a challenge for currency and interest rate management.

It highlighted the fact that International Central banks will use the soft controls to deal with excessive capital inflows. It has also cautioned commercial banks regarding a decline in profitability and asset quality.

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