Global fears bring markets below 18k
Amidst sessions marked by high volatility, the Indian stock markets gained during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending higher by 1.4% and 1.3%, respectively. The BSE Mid- and Small-cap indices, however, continued to outperform their large cap counterparts, with both the indices gaining 3.2% and 4.1%, respectively. After touching 18,000 during intraday trade, the key benchmark indices slumped, as weak global stocks and worries about the economic health of Greece triggered profit taking. Besides, a spike in food price inflation also rekindled fears of a hike in key policy rates. On the sectoral front, most of the indices ended in the green, with the BSE Realty index gaining the maximum of 5.7%, followed by the BSE Auto index. However, the BSE IT index ended in the negative territory, losing 0.5%.
BSE IT Index - Rupee rise dampens the growth momentum
The BSE IT Index lost 0.5% over the previous week, underperforming the Sensex by 1.9%, mainly on account of the Rupee's appreciation (by 1.1%) vis-à-vis the US Dollar. IT companies such as TCS, Wipro, HCL Tech and Tech Mahindra declined by 1.9%, 1.5%, 3.8% and 1.1%, respectively, while Infosys and Mphasis gained a mere 0.3% each. During the 4QFY2010, the Rupee had witnessed a sequential appreciation of 1.6% against the US Dollar, 7.7% against the Euro and 5.9% against the GBP. We believe that this appreciation will result in lower realizations in Rupee terms, which will mute the growth in the reported currencies, thereby resulting in lower-than-expected earnings in 4QFY2010 by most of the IT companies. Our Top picks in the sector are Tech Mahindra and Mphasis.
McNally Bharat Engineering - Initiating Coverage:
McNally Bharat Engineering (MBE) is a leading and experienced turnkey solutions provider for the core sector. We believe that MBE is well-placed to take advantage of the burgeoning industrial capex on account of being a turnkey solutions provider and having a presence in the high-margin product business. We Initiate Coverage on the stock with a Buy recommendation and Target Price of Rs467, implying a P/E of 14x on FY2012E EPS EPS.
3i Infotech:
3i Infotech has completed its QIP to raise Rs180cr through issuance of 2.29cr equity shares at the floor price of Rs78.6 per share.
Godrej Consumer Products (GCPL):
GCPL has sealed the deal to acquire the Megasari Group as well as its distribution arm, PT Intrasari, for an undisclosed amount (all-cash deal).
Jagran Prakashan (JPL):
The Blackstone Group is investing Rs225cr in Jagran Media Network Private Ltd, which will hold a majority share (promoter holding at 63% will get consolidated and transferred to this entity) in JPL.
Reliance Industries (RIL):
RIL has acquired 40% stake in Atlas Energy's Marcellus Shale gas position in a deal valued at US $1.7bn.
