Weekly Market View: Biding Time

The market is about to make a major move but is not clear now in which direction

The market was down at the beginning of the week on weak global cues on concerns over the debt crisis in Hungary. Strong Chinese export data and domestic industrial output helped the market to pare losses posted early in the week. However, the negative closing on Monday and Tuesday caused the damage and both benchmarks-the Sensex and the Nifty-ended flat for the week.

The top weekly gainers on the Sensex were Cipla (up 4%), Mahindra & Mahindra, HDFC Bank, Reliance Communications (RCom) and BHEL (up 3% each). The top losers were DLF (down 7%), Hindalco Industries (down 6%), Infosys Technologies (down 4%), ITC and Tata Steel (down 3% each).

In the sectoral space on the BSE, auto surged 2% while healthcare gained 1% while realty tanked 4% and IT was down 3%.

The monsoon arrived in the early part of the week as per the prediction by the weather office in the previous week. For the week ended 2nd June, rainfall was at 16.7 millimetres, down 11.2% from the normal weekly rainfall of 18.8 millimetres.

Montek Singh Ahluwalia, deputy chairman of the Planning Commission said that fuel prices must be increased. Oil minister Murli Deora has made a strong pitch for raising fuel prices, saying it was needed to cut losses of State-run oil companies. The oil ministry is in favour of a gradual increase in fuel prices starting with a quick rise in petrol prices and gradual increase in diesel prices. The empowered group of ministers (EGoM) is likely to meet on 17th June to discuss fuel pricing reforms, as the meeting to be held earlier this week was deferred due to absence of key members.

The Bank of Japan has kept interest rates near zero and had outlined last month a new loan programme aimed at encouraging commercial banks to lend more to industries with growth potential. Japanese bank lending marked its biggest annual fall in nearly five years in May, as companies were reluctant to increase capital spending. Bank lending fell 2% in May from a year earlier, dropping for the sixth straight month and marking the biggest annual decline since July 2005.

The Reserve Bank of India (RBI) said that inflation is likely to ease with the monsoon; however, it is speculated that the central bank will tighten the monetary policy in its quarterly review next month. It has played down any concerns regarding food prices.

The International Monetary Fund (IMF) said that the euro crisis could affect global trade dampening demand for Asian exports and sending "hot money" into the region if policymakers fail to act swiftly and appropriately. The strong growth prospects in Asia were also likely to bring capital inflows into the region leading to an asset bubble.

Chinese exports in May grew about 50% from a year earlier. Consumer prices in May rose 3.1% from a year earlier, accelerating from 2.8% in April.

The Indian government has a cash balance of Rs480 billion with the RBI and will spend it gradually rather than in one go. It will expand liquidity support as banks are likely to need more cash ahead of the payment of advance tax and payment towards the broadband wireless access (BWA) spectrum fees.

Finance minister Pranab Mukherjee said that the target of direct tax receipts for the financial year 2010-11 is expected to exceed the target of Rs4.30 lakh crore.

The government has deferred its decision to announce the date of selling stake in two mining companies-Coal India and Hindustan Copper. It planned to sell about 10% stake in Coal India, the world's largest coal miner, through an initial public offering to raise roughly $2.7 billion. It also planned to sell about 20% stake in Hindustan Copper to raise up to about Rs50 billion ($1.06 billion).

The food price index rose 16.74% in the year to 29th May, higher than the previous week's annual reading of 16.55%, following a rise in prices of fruits and potato. The fuel price index climbed 14.23%, compared with an annual rise of 14.14% in the previous week.

Industrial output rose 17.6% in April from a year earlier, the strongest since December 2009, helped by buoyant domestic consumer demand, a revival in exports and higher infrastructure spending, data showed on Friday. Manufacturing production was up 19.4% over the year-ago period. Mining output was up 11.4% and power generation rose 6%. Car sales in India rose an annual 30% in May over the year-ago period. The finance minister termed the industrial output data as "encouraging."

Japan has indicated that it will raise taxes and warned on defaulting on its public borrowing. The government plans to compile a medium- and long-term plan for reining in debt by 22nd June at the latest and to limit the government bond issuance at 44.3 trillion yen ($484.6 billion) in the year to 31st March 2012.


Parabolic Drugs has a limited product category

The company derived 100% of its gross income (Rs374.52 crore) from the antibiotics category in the nine months ended December 2009

Chandigarh-based pharmaceutical company Parabolic Drugs Ltd (PDL) hits the primary market with its initial public offering (IPO) on 14 June 2010. The company has fixed the price band at Rs 75-Rs85 per share and plans to raise Rs200 crore through the issue.

The IPO has been assigned 'Grade 2' by ratings agency Brickwork, indicating 'below average' fundamentals. ICICI Securities Ltd and Spa Merchant Bankers Ltd are the lead book running managers to the issue. The issue closes on 17 June 2010.

Meanwhile, the BSE healthcare index has jumped 11% so far this year.
PDL derived 100% of its gross income (Rs374.52 crore) from the antibiotics category in the nine months ended December 2009 as it specialises in a limited number of therapeutic categories.

The company produces Semi Synthetic Penicillin (SSP) and Cephalosporin range of antibiotics in oral and sterile forms, along with their intermediates.

It had a cash flow of Rs4.42 crore for the nine months ended 31 December 2009. The company registered a net profit of Rs21.41 crore in the nine months ended December 2009 on a total income of Rs350.15 crore.

The company operates in a highly competitive environment especially in the Active Pharmaceutical Ingredient (API) product segment. Parabolic faces entry barriers as the research, testing, manufacturing, selling and marketing of pharmaceutical products are subject to extensive regulations, which differ from country to country.

The name and logo of 'Parabolic' are not registered trademarks of the company. A majority of its raw materials are imported from China. PDL imported 22.62% of its raw material from China in FY09. The company has filed 11 patent applications that are pending approval. The pharmaceutical industry is prone to patent and infringement risks.

The Director General of Foreign Trade (DGFT) and the ministry of commerce have demanded Rs2.17 crore from the company for non-fulfilment of certain export obligations. The company has made preferential allotments to various entities and promoters at different prices on the same date.

PDL will use the proceeds to set up a multi-purpose block III in Derabassi (Punjab), establishing a Sterile Cephalosporin plant at Derabassi, establishing of the Chachrauli plant (Haryana), and for investing in its subsidiary and repayment of loans. Its competitors like Neuland Laboratories and Dishman Pharma have EPS of Rs21.2 and Rs11.2 respectively. Parabolic's EPS has fallen from Rs12.70 in FY08 to Rs6.6 in FY09.




6 years ago

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6 years ago

Poor quality IPO. There will not any listing gains. Stay away. For detailed analysis log on to FIRSTCHOICEIPOANALYSIS.COM

Govt may recommend freezing of suspicious bank accounts

Banks are at present undertaking a one-time exercise to ensure 100% compliance of the KYC procedures by account-holders

The finance ministry is likely to recommend freezing and closure of bank accounts found suspicious during the ongoing exercise by banks to collect information under the 'Know Your Customer' (KYC) norms, reports PTI.

Banks in both the public and private sector are at present undertaking a one-time exercise to ensure 100% compliance of the KYC procedures from all, new and old, customers.

The KYC filing includes sharing personal and other details by a bank customer to the respective banks. All the banks have asked their customers to file fresh and updated details to help compile a fresh list of the account holders as instructed by RBI.

The KYC, suggested by banking regulator RBI to be mandatorily undertaken by all the banks, is a vital procedure adopted by the financial institutions to check money laundering and tackling of terrorist-related financing.

"Once the KYC compliance, as notified by various banks on the directions of the RBI, is completed by this month end the enforcement agencies keeping track of suspicious transactions will suggest freezing or termination of non-KYC accounts," a senior Revenue Department official said today.
However, the final decision rests with the management of individual banks, the official said.
The guidelines for KYC, prepared by Indian Banking Association (IBA) in consultation with financial intelligence units of the country, have also underlined customer profile, account opening procedures, establishing relationship with specific categories of customers as well as an illustrative list of suspicious activities.
Financial enforcement agencies like the Enforcement Directorate (ED) and the Financial Intelligence Unit will also have a better input of the account holder from the banks once they demand information on spotting a suspicious account or transaction, the official said.
The step is aimed at strengthening Anti-money laundering mechanism and checking terror financing through Indian banking channels, the official said.
Under Section 12 (c) of the Prevention of Money Laundering (PMLA) Act, banking companies, financial institutions and intermediaries of securities market have to mandatorily "verify and maintain the records of the identity of all its clients".


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