February IIP worsens; markets may see a pullback amidst weak global cues..
week was engulfed by Sun Pharma’s acquisition of Ranbaxy Laboratories. The
landmark all-share $4-billion transaction heralds the merger of two major
Indian pharmaceutical companies to create the world’s fifth-largest generic
drug maker by sales. Under the terms of the agreed deal, Ranbaxy shareholders
will get 0.8 Sun Pharma share for each Ranbaxy share held.
Sterlite ended over 3% after the company released production data for the
fourth quarter and financial year ended March 31, 2014. The mined metal
production for the year was 880,000 tonnes, marginally higher than the previous
the banking pack, State Bank of India ended up 4.5% after the state-owned
banking major tapped the overseas bond market with a dual tranche benchmark
issue of 5-year and 10-year maturity to raise up to $1-billion.
Auto major Maruti Suzuki ended with marginal gains. The company is recalling
103,311 units of its models Ertiga, Swift and DZire made between November 12
and February 4 to replace faulty fuel filler neck.
Tata Motors ended up 4.5% after Jaguar and Land Rover (JLR), its British-based
arm, registered a 2.7% year-on-year (yoy) growth in retail sales in March 2014.
However, for FY2014, JLR registered a robust growth of 15.9% yoy to 434,311
units riding on the back of strong momentum in recently launched models.
IIP worsens: India’s
index of industrial production (IIP) in February shrunk at -1.9 percent versus
an expansion of 0.8 percent (month-on-month). This is a nine-month low for the
industrial output; street participants had estimated this macro data to be
around 0.34 percent. The mining sector has grown at 1.4% versus 0.7% (MoM),
while the manufacturing space has shown a steep degrowth coming in at -3.7%
versus -0.7% (MoM). This is the lowest level seen for manufacturing since
November 2011 which is a 28-month low. Electricity sector growth strengthened
at 11.5 percent versus 6.5 percent and basic goods growth came in at 3.9
percent versus 0.9 percent. January’s IIP has also been revised to 0.8 percent
from 0.1 percent. February’s capital goods grew at -17.4 percent versus -4.2
percent. Consumer durables fell -9.3 percent versus -8.3 as seen in January.
The cumulative growth for the period April-February 2013-14 over the
corresponding period of the previous year stands at (-) 0.1%. Adding to the
economic pessimism is the March trade deficit that hit a five-month high in
March as merchandise exports fell for a second straight month.
Trade deficit still a concern: India's trade deficit hit a five-month high in
March as merchandise exports fell for a second straight month, making it
tougher for policymakers to lift curbs on gold imports that have helped to
narrow the country's current account gap. Asia's third-largest economy, which
is struggling through its longest period of sub-5 percent economic growth since
the 1980s, is seen vulnerable to any shift in capital flows. Among the
"Fragile Five" emerging economies, India suffered from massive
capital outflows last year, in part on concerns over a bloated current account
deficit, after the US Federal Reserve signalled a trimming down of its monetary
stimulus. Heavy outflows sent the rupee to a record low in August, prompting
the authorities to build up foreign-currency reserves and clamp down on gold
imports. India's trade gap in March widened to USD 10.51 billion, its highest
since October 2013, data from the Ministry of Commerce and Industry showed on
Friday. Overseas sales of goods fell 3.15 percent from a year earlier to USD
29.58 billion in March. Merchandise exports for the 2013/14 fiscal year,
however, grew 3.98 percent on year to USD 312.36 billion. Together with a 8.11
per cent decline in annual imports, that helped sharply narrow the country's
full-year trade shortfall to USD 138.59 billion from USD 190.34 billion a year
ago. As a result of curbs on gold, imports of the metal have almost halved,
scripting a dramatic improvement in the current account deficit that is
estimated to have narrowed to 2 percent of GDP last fiscal year compared with a
record high 4.8 percent a year ago. The import curbs, however, have been deeply
unpopular with households who invest in the yellow metal to protect their
savings from inflation and to provide gifts at weddings and on other special
occasions. Pressure is mounting on political parties to review the restrictions
after national elections in May. Such a move could reignite concerns over the
current account deficit as structural factors that keep it wide - such as weak
manufacturing exports - are yet to be fixed. Meanwhile, a stronger rupee is
eroding the competitiveness of Indian exports, which contribute nearly 16
percent to the country's gross domestic product. The rupee touched an
eight-month high of 59.5950 on April 2, but has since given up the gains. A
rally in domestic shares on the back of heavy foreign buying has helped support
US markets remain under pressure: Globally, US stocks slid in a volatile session
on Friday, with the Nasdaq closing below the 4,000 mark for the first time
since early February. Selling accelerated late in the afternoon, with the
biotech and other momentum stocks again leading the Nasdaq sharply lower.
JPMorgan's disappointing earnings also gave investors a reason to sell some
bank stocks. For the week, the S&P 500 fell 2.6 percent and the Nasdaq lost
3.1 percent, the biggest weekly decline for both indexes since June 2012.
activity: FIIs have been aggressive buyers in Indian
equities, having purchased stocks worth nearly Rs 7,000 crore in April so far.
During the first three months of the current calendar year, FIIs were net
buyers in Indian equities to the tune of Rs 22,196 crore, according to data
available on SEBI website.
Ahead: Markets are likely
to remain volatile, with only three trading sessions next week. The voter
turnout will be keenly watched as the next phase of elections unfolds.The
government will release inflation numbers based on the Consumer Price Index and
Wholesale Price Index on Tuesday.IT sector will be focus as Infosys
kicks off the fourth quarter earnings season on Tuesday, followed by TCS on
Wednesday, and Wipro and HCL Technologies on Thursday. Index heavyweight
Reliance Ind will release Q4 earnings on Friday.
will remain closed for trading on 14 April on account of Baba Saheb Ambedkar
Jayanti and on 18 April on account of Good Friday.