Business India-Weekly News letter.
(Source:Probity (India) Ltd.)
Subject: Probity Weekly Newsletter # 29 Date : February 13, 1999
Date: Sat, 13 Feb 1999 20:57:26 +0500
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Probity Weekly Newsletter # 29 Date : February 13, 1999
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***** Key indices
Last Week This week % change
Major Indices
BSE Sensex 3,215.4 3,337.5 3.8
NSE Nifty 936.3 970.3 3.6
S & P CNX 500 650.1 674.1 3.7
GDR Index* 608.6 601.3 (1.2)
Hang seng 9,190.2 9,425.4 2.6
Nikkei 13,898.1 13,973.7 0.5
Dow Jones 9,304.2 9,274.9 (0.3)
FTSE 5,855.3 5,950.7 1.6
Exchange rates
Rupee to Dollar 42.5 42.5 0.0
Yen to Dollar 112.7 115.1 2.1
Rupee to Euro 48.1 47.7 (0.7)
Bullion (Mumbai)
Gold std. (Rs/10gm) 4,355.0 4,350.0 (0.1)
Silver (Rs/kg) 8,340.0 8,285.0 (0.7)
Inflation - WPI 4.4 4.7 6.8
FII Investment (net) (361.0) 929.0
Probity IT index 703.5 751.4 6.8
Probity FMCG index 199.0 211.8 6.4
Probity Pharma index 166.6 180.7 8.4
* GDR Index is for the previous day.
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***** Telecom tangle
Telecom policy is getting into a tangle of several vested interests. The private operators who bid fancy prices devoid of logic, do not want to pay their dues. They also do not want to lose their duopoly. In short, they want to have the cake and eat it too. Well that is possible in India if you have proper political nexus. Major reforms getting into swamp, is not new to us. For instance, fast track power projects have been a fast on the nation. Telecom cable companies share prices have been soaring. Reasons foundthrough research are- major bonanza expected in the budget, release of DoT orders (for a long time, DoT was inactive and therefore jump in volumes on a yoy basis) and a substantial speculative activity.
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***** Russia's relapse?
Russia is set to relapse in a financial crisis. The country does not have funds to repay loans of US$17.5bn falling due this year. As misfortunes never come alone, Russia had a poor agriculture. Its largest forex earner crude oil prices continue to remain in dumps. President's ill health, Prime Minister's inability to take austere measures and IMF's pre-condition of stringent reforms before any further aid, all indicate towards serious problems ahead. While to a large extent global investors would have factored in the eventuality, one has to remain alert on the way new crisis unfolds and impacts other economies in the world.
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***** Market mood
* In the last week, market mood was buoyant. BSE Sensex and NSE Nifty
appreciated by 3.8% and 3.6% respectively.
* Probity IT, Probity FMCG and Probity Pharma indices all outperformed BSE Sensex, rising by 6.8%, 6.4% and 8.4% respectively against jump of 3.8% in BSE Sensex.
* The second rung software companies were in the limelight. For instance, Digital, Fujitsu, Maars and Silverline recorded unprecedented jump of over 40% (circuit on all the five working days) in a week!. In FMCG, Indian Shaving and Tata Tea were the top gainers.
* FII figures released by SEBI indicated a net purchase of Rs929m in the previous week. Reportedly, investment was restricted in the IT, FMCG and Pharma sectors.
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***** Investment strategy
* Notwithstanding the run up, we recommend to remain overweight in IT, FMCG and Pharma stocks. These stocks will continue to witness high volatility but that should not concern long term investors.
* Investors can accumulate stocks of medium size Indian FMCG companies
available at attractive valuation.
* For fixed returns, carry forward (badla) on stock market continues to give best returns yielding more than 20% per annum.
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***** News snippets
* Department of statistics has estimated GDP growth for 97-98 at 5.8%
using the new annual series of industries changing the base year from
1980-81 to 1993-94. The growth comprises 5.3% yoy in agriculture, 4.6% in manufacturing and 6.7% in services. CSO estimated industrial sector growth at 3.2% in December 1998.
* The government's estimates of indirect tax collections are going haywire. Customs collections for the first ten months recorded a negative 1.5% yoy growth against a target of 17% for the fiscal. Excise collections registered a growth of 7% during the first ten months, lower than its target of 21%.
* According to figures released by Associations Council of the
Confederation of Indian Industry (CII), 47 sectors posted lower growth
against the corresponding period in the last year. Only 29 sectors showed improvement and four remained stagnant.
* The annual inflation rate rose to 4.7% during the week ended Jan 23 '99 due to a rise in prices of fruits, vegetables and certain drugs.
* The government has announced that lending to food processing industry will be considered as part of priority sector lending. This will have positive impact on food processors with relatively easy access to credit.
* HR coil prices which were increased (net of discount) by Rs800-1000 per ton are said to have been rolled back partially following the protest by CR producers.
* Cement output recorded an impressive 9% yoy jump in Jan '99. Cement
sales were up by 5.4% yoy in first 10 months i.e. April to Jan. The
sustained growth in consecutive second month gives hope for early revival of the sector.
* Packaged Tea market shrunk by 8.3% in second half of 1998 due to 8% levy of excise duty. Coffee producers are facing tough times due to devaluation of Brazilian currency. India's coffee exports have nosedived by over 90% in Jan '99. Coffee board statistics revealed that coffee exports declined to a meagre 809 tons as compared to 12106 tons in the previous year.
* Natural rubber prices in the country have declined to a 7 year low due to dumping by SE Asian countries and continued slump in industrial
consumption, mainly by tyre companies. The Current prices are far below the revised benchmark price of Rs3405 per quintal fixed by the government.
* Satyam plans Rs.1 bn investment in setting up its own international
gateway for internet access. The gateway will be ready in the next 4-6
months. Satyam has already 15000 subscribers. The existing bandwidth of 8 MB will be expanded to 16 MB. It is planning to allocate a part of this bandwidth to Hyderabad also.
* Hindustan Lever plans to enter direct marketing with its new Aviance
range of cosmetics, albeit a little late after Amway, Modicare etc. The Company plans to launch the products on the Valentine's day, Feb 14. The launch will be through a separate subsidiary and will focus on skin care, color cosmetics segment. The products will be priced on premium in line with other products sold through similar channels.
* International energy agency had forecast that world oil demand will have a weaker recovery and will rise only 1.4% to 74.7m barrel per day in 1999.
* Dabon International, a 50-50% joint venture between Dabur India and
Bongrain of France plans to launch its second cheese brand. Cheese has a small market in India and the market is already overcrowded.
* Aptech and Castrol have announced issue of bonus shares in the ratio of 1:1.
* Cipla has reduced antiaids products Zidovir by 25%. This however will not have nay significant effect on the bottom line.
* In the global news Microsoft and BT have come together to develop a new generation of mobile devices which will allow accessing internet without using TCs. There are more alliances for the same concept namely Cisco and Motorola, Nextel and Netscape.
* On the global front, Japan's central bank announced cut in its overnight call rate to 0.15% from 0.25% to revive the sagging economy. It had adversely affected the sentiment, as global bond prices dropped on Friday and US stocks also ended lower.
* Electronic Data Systems(EDS) and MCI World Com, two giants have done a major asset swap of US$17bn. MCI will hand over software operations to EDS and take over EDS's global network.
* The Euro currency has been weakening against dollar. Reasons are two fold - one strong growth of US economy and the second apprehensions about European banks exposure to Brazil's crisis.
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