Markets This Week
Muted corporate earnings and weak global cues did not give much impetus to the country’s equity markets this week. Both the BSE and the NSE remained sluggish as major scrips fell sharply on Friday, 24 July, 2015, the last trading session of the week. The 30 share S&P BSE Sensex fell by 258.53 points for the day on Friday and 351 points or 1.23 percent for the week closing at 28,112.31 points (previous weekly closing was at 28,463.31 points). The other major index, the 50 share CNX Nifty closed Friday’s trading session at 8,521.55 points, having dropped 68.25 points from the previous day and sliding 88.3 points or 1.02 percent from its previous weekly close at 8,609.85 points. Both the indices closed at a 1 ½ week low level on Friday. Apart from a number of public sector banks, Ambuja Cements, HDFC, Maruti Suzuki, and IDFC are among the leading companies likely to declare their quarterly earnings next week. Retail investors are suggested to keep an eye on these and other market factors before investing in equity. The global fall in gold rates has caused much worry back home with the value of RBI’s gold reserves going down by about 44 percent. Traders at the bullion market are extremely cautious. The World Gold Council, however, feels that fall in prices may stimulate demand in India.
Quarterly Results – RIL Posts 4% YOY Profit Growth, Axis Bank Profits up 18.7%
The corporate earnings and quarterly results declared this week was a mixed bag. Reliance Industries Ltd (RIL) greatest support came from the operating profits of its refining and petrochemicals business. RIL declared a net profit of INR 6,222 crore for the quarter ended 30 June. This is a 4 percent year-on-year growth in its net profit – muted earnings going by street estimates. Lower prices of crude oil gave RIL’s petrochemicals business its necessary boost despite a fall in revenue by 18 percent to INR 20,858 crore. Operating profits in this segment rose by 25.5 percent to INR 2,338 crore.
Axis Bank Q1 results brought great cheer to investors as the company reported an 18.7 percent growth in net profit for the quarter ended 30 June. The bank, among the leading private sector banks in India, declared a net profit of INR 1,978.44 crore. The bank’s net profit in the same quarter of the previous fiscal year amounted to about INR Rs 1,666.76 crore. The bank’s total income for the Q1 of this fiscal year is pegged at INR 12,234.41 crore vis-a-vis INR 9,980.47 crore in the quarter last year. Despite the cheer, there are some concerns that the bank’s non-performing assets and bad loans have also gone up this quarter.
GoI Disinvestment in Power Finance Corporation Underway
In its next leg of disinvestment, the Government of India has decided to sell a 5 percent stake in the Power Finance Corporation, hoping to raise about INR 1,700 crore (in prevailing market prices). The government will be divesting 5 percent of its PFC stake on 27 July, 2015. The Indian government currently holds 72.80 percent equity in PFC and is likely to sell off about 6.60 crore shares. The sale will be held between 0915 hrs and 1530 hrs by both the National Stock Exchange and the Bombay Stock Exchange.
The Government’s Department of Disinvestment plans to raise about INR 69,500 crore through stake sales in PSUs in the current fiscal. The only disinvestment undertaken by the GoI hitherto this year is that of the Rural Electrification Corporation (REC). The sale was a success as the offer was subscribed over 5 times and the government managed to raise about INR 1,550 crore.
Premature PF Withdrawal Limit to be Reduced
The Labour Ministry is set to make major changes to the premature provident fund withdrawal guidelines. Currently, an Employees Provident Fund Organisation (EPFO) member who is not employed for over two months may withdraw the entire provident fund amount. The Labour Ministry intends to cap the withdrawal amount to about 75 percent of the fund present. The remaining shall be given to the member when he/she reaches the age of 58. This should allow for financial security of the individual during old age. EPFO trustees supported the ministry’s decision.
India’s Sugar Production in Surplus for 6th Year
Despite major concerns regarding the monsoons in most of the sugarcane producing areas, India has managed to come up with surplus sugar production for the sixth consecutive year. India is the second largest sugar producer in the world and is topped only by Brazil. Indian sugar industries are likely to produce about 28 million tonnes in FY 2015-16 – about 3 million tonnes in excess of domestic demand. While the government is making efforts to effectively export the excess production, some key concerns are that prices may fall due to excess production pushing the already stressed sugar mills into further losses.
Suresh Narayan is New Maggi India Head
Amidst an ongoing tussle with food safety regulators Nestlé announced that Suresh Narayanan, who is currently CEO of Nestlé Philippines, will soon take charge as the managing director of India operations. In intimation to the stock exchanges of India, Nestlé India said that Narayanan will replace current MD Etienne Benet on 1 August, 2015. Last month, the company was forced to recall all its Maggi 2-Minute Noodles stocks when food-safety regulators claimed that the product contained dangerously high levels of lead and MSG. Narayan, Nestlé believes, will be well-equipped to turn the tide in this major crisis faced by the company.
74% Indians Positive about Economy in Pew Poll
According to a Pew Research report released this week, about 74 percent Indians think that the country’s economic conditions are good this year. Last year only 64 percent thought they were good. The report further said that, “In emerging markets, half or more in 14 of 21 countries see their economy as negative. The gloomiest are Ukrainians (94 percent), Lebanese (89 percent) and Brazilians (87 percent)”. People living in some of the larger economies, however, showed signs of faith in global recovery. The report concluded that the overall sentiments with regard to global economy remain largely unchanged from last year.