Markets this week
Fears of a decline in global economic growth, a falling domestic currency led by dollar sales, and the looming devaluation of the Chinese Yuan dominated the week. Global investors largely kept off the risk of investments into the Indian equity markets which closed at a 2 month low on Friday. Key market indices posted an 11 week low for the week ending 21 August, 2015. The 30 share BSE sensitive index, Sensex closed the week at 27,366.07 points against last week’s closing levels of 28,067.31 (14 August, 2015) – a net decline of 701.24 points or 2.49 percent. The NSE’s key index, the 50 share CNX Nifty also fell some 218.6 points or 2.56 percent, closing the week at 8,299.95 points vis-à-vis last week’s close at 8,518.55 points. The top gainers at the Sensex this week were ITC, ACC, Hindustan Unilever, and Ambuja Cements while the top losers included DLF, Hindalco, Bharti Airtel, and Tata Motors.
Fears of a currency war loomed large and the escalating tensions between North and South Korea did nothing to mitigate fears of an Asia-led decline in global growth. Most of the emerging markets this week have been looking at China’s currency strategy and the devaluation of the Yuan shall be an important theme in the week to come as well. While the Indian equity and currency markets may be less affected than others due to its strong macro indicators, they are unlikely to remain unaffected by the movement of the Chinese currency. Market experts advise caution in investments over the next week. It is crucial for the Nifty to sustain 8350+ levels over a fortnight to signal easing of the selling pressure that it has experienced this week.
On Friday, the rupee opened at 65.71 and declined to about 65.91 before closing at 65.83 against the dollar. It is likely that the domestic currency will experience much volatility in the week to come. While the RBI Governor has assured that the central bank’s policy will include effective responses to keep the rupee buoyant in the face of a depreciating Yuan and that the country’s exports will match up to expectations, a short-term depreciation of the INR may affect the inflow of funds to the Indian markets.
Airtel and Uber announce partnership
Mobile services provider, Bharti Airtel and mobile taxi locator, Uber Technologies announced a strategic partnership tailormade for the Indian markets. According to the terms of the new partnership, Uber users across the country will now be able to use Airtel’s mobile wallet – Airtel Money to pay for their Uber cab rides. Uber has been using another mobile wallet service from Paytm thus far but there has been no announcement regarding the discontinuation of this service as yet.
Also part of the deal is free 4G Wifi access to all Uber cab users. Uber cabs will now be enabled with an Airtel 4G MiFi dongle that can provide high-speed internet access to all those riding the cabs. While this has been launched in Mumbai currently, Airtel and Uber plan to extend this service to all the other cities in the country. This announcement comes within a week of Ola’s launch of the Ola Select service whereby select customers get free WiFi access in their taxis.
Uber had announced an investment of USD 1 billion into the Indian market last month. A strategic partnership with Airtel (which has a 200 million customer base in the country) is seen as a hearty move in expansion of its services and base.
Maruti Suzuki hikes car prices
Within a month of Hyundai Motor India’s price hike announcement, Maruti Suzuki, India’s largest car maker has also decided to increase the prices of all its cars (except the recently launched premium crossover S-Cross). The hike is likely to range between INR 3000 and INR 9000 depending on the car and model. This is the first time in nearly two years that the auto maker has gone for an increase in price of its products. “The price revision was effective from 11 August 2015 and communicated to the dealers on the same day. The price revision is on account of changes in dealer margin and a minor calibration in prices”, said the company in its announcement.
Market experts believe that the hike is unlikely to have much impact on demand since it is marginal in most cases, and yet it was avoidable given the soft pricing of raw materials this year. Earlier this year, Hyundai announced a hike of up to INR 30,000 due to increase in cost of production.
TN set to revive Nokia plant
The Tamil Nadu government is all set to woo Nokia and other investors in the state. The government set up a task force – the Fast Track Task Force (FTTF) – to revive the defunct Nokia plant at Sriperumpudur apart from inviting new electronic production facilities into the state. The Tamil Nadu government has announced that it will work with the center and come up with a revival package for the handset production facility. The facility at Sriperumpudur is likely to house other global mobile device manufacturers as well and the task force has been given a target of having this unit produce 500 million mobile devices by the year 2019. India is one of the largest markets for mobile device manufacturers across the world and TN has been particular about scaling up IT and electronics investments in the state.
GoI to sell 10% stake in IOC
In the next round of disinvestment, the government of India has announced a 10 percent stake sale in Indian Oil Corporation. The government intends to sell some 24.27 crore shares in the PSU through the offer for sale (OFS) route. The government currently holds a 68.36 percent interest in the IOC. About a fifth of the shares on sale or some 20 percent will be reserved for retail investors only. Retail investors are likely to get a 5 percent discount on the floor price as well. The government intends to raise some INR 9,500 crore from the stake sale. This is likely to be the biggest disinvestment exercise undertaken by the government this quarter.