Weekly Stocks Outlook

Telecom Stocks Outlook:

The rally in the shares of Reliance Communications Ltd is over now and the stock is expected to see steady corrections in the coming sessions.

Bharti Airtel Ltd is expected to continue trading with a bearish bias, while Idea Cellular Ltd is expected to trade sideways in a narrow range, the analyst said. 

Cement Stocks Outlook: 

Cement companies' stocks are likely to track the broad market next week but the trend is seen subdued because of a weak demand outlook for the construction material as monsoon sets in. 

Auto Stocks Outlook: 

Shares of major automakers are seen tracking the indices next week, analysts from various domestic brokerages said, adding that they would also be impacted by sales numbers for the month of May. 

"Sales numbers would have an effect, yes, but it would not be much. Maruti is likely to post strong numbers, which should have a positive effect on its stock," an analyst said. 

Capital Goods Stocks Outlook

Trading in shares of capital goods and engineering companies is seen mixed next week with long-term investors picking up shares of Larsen & Toubro and Bharat Heavy Electricals, which are currently trading at 

attractive levels, dealers said. 

"Some mutual funds may be rebalancing their portfolios and they are likely to pick up shares of companies like L&T and BHEL with a long-term view," a dealer with a local brokerage said. 

IT Stocks Outlook: 

Shares of major information technology companies are seen trading positive next week due to weakness in the rupee, which is expected to boost companies' performances in the near term, analysts said. 

The rupee today fell to an over 11-month low against the dollar because of weak macroeconomic fundamentals and several global factors including the gradual strengthening of the dollar globally. So far this month, the rupee has depreciated more than 4% against the US currency. 

Oil Stocks Outlook:

Shares of state-owned oil marketing are expected to open up next week after Indian Oil Corp announced a hike of 50 paise per litre on diesel and 75 paise per litre of petrol after market hours today. 

The other two companies--Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--usually follow Indian Oil in revising prices. 

Steel Stocks Outlook:

Shares of major steel companies are expected to continue their downward movement next week on weak fundamentals, analysts said. 

There is over-supply in the domestic market and uncertainty over when demand for steel will pick up. The uncertainty on demand is the main factor that is expected to keep performance of domestic steel giants muted in the coming sessions, said analysts. 

FMCG Stocks Outlook: 

Analysts see buying in stocks of fast-moving consumer goods companies such as Hindustan Unilever, Colgate Palmolive (India) and Dabur India, which have been able to deliver a strong volume growth in Jan-Mar. 

"We have seen that companies like HUL, Dabur and Colgate have delivered good volume growth, they may have spent more on advertising for doing so, but they have displayed that they have the capacity to grow in a tough market, the money spend on advertising should be seen as an investment in the brands," said Vishal Jajoo, analyst at Nirmal Bang Securities. 

Pharma Stocks Outlook: 

Shares of major pharmaceutical companies are seen gaining next week after making losses this week due to disappointing Jan-Mar earnings, cautious investor sentiment, and a number of them hitting the headlines for all the wrong reasons, analysts said.

Q4 GDP at 4.8%, FY13 GDP growth at 5%

India's economy grew by 5% in 2012-13, its lowest rate in a decade but in line with an official estimate, government data showed on Friday.

Gross Domestic Product grew at 4.8% in the quarter ending March 31, the date showed, in line with expectations.

The manufacturing sector grew at an annual 2.6% during the quarter while farm output rose just 1.4%, the data showed.

Highlights:

Manufacturing sector growth was at 2.6% vs 0.1% y-o-y.

Mining sector growth at -3.1% vs 5.2% y-o-y.

Construction sector growth at 4.4% vs 5.1% y-o-y.

while farm sector growth at 1.4% vs 2% y-o-y.

Q3 GDP growth revised to 4.7% from 4.5%.

India Mayve Become Worlds Third Largest Economy: OECD

Think tank says country might have overtaken Japan,but lowers FY13 growth projection to 5.3% 

PRESS TRUST OF INDIA LONDON 

India has probably surpassed Japan to become the worlds third-largest economy after the US and China,Paris-based think-tank OECD said on Wednesday even as it lowered the country's economic growth projection for 2013 to 5.3%. 

China will likely pass the United States as the worlds largest economy in the next few years and India has probably recently surpassed Japan to be third largest, said the OECD Economic Outlook report.

Until around 2020,China is set to have the highest growth rate among major countries,but could then be surpassed by India,it further said.OECD also said that by early 2030s,the BRIICS' (Brazil,Russia,India,Indonesia,China and South Africa) combined GDP should roughly equal that of the OECD (based on current membership),compared with just over half that of OECD now.Between now and 2060,GDP per capita is seen to increase more than 8-fold in India and 6-fold in Indonesia and China, it added.

The Organisation for Economic Cooperation and Development (OECD),which in November had projected India to grow at 5.9% in 2013,cautioned that structural bottlenecks in the country could further constrain investment and growth potential.GDP growth is projected to rise gradually over the next two years... Significantly more growth would be forthcoming if structural bottlenecks were swept away by fundamental structural reforms, the report said.Looking ahead,it said India is likely to improve growth to 6.7% next year,after having logged a decade's low of 3.8% in 2012.OECD said the world real GDP is projected to increase by 3.1% this year and by 4% in 2014.Across OECD countries,GDP is projected to rise by 1.2% this year and 2.3% in 2014.Growth in non-OECD countries will rise by 5.5% this year and 6.2% in 2014.In the US,activity is projected to rise by 1.9% this year and by a further 2.8% in 2014,OECD said.

GDP in the Euro area is expected to decline by 0.6% this year and then rebound by 1.1% in 2014.Japans GDP is expected to grow by 1.6% in 2013 and 1.4% in 2014,it added.Talking about India's neighbour China,OECD forecast that its economy would grow 7.8% this year,down from a previous estimate of 8.5%.

Oil fuels FY13 exports but fails to arrest overall decline

Petroleum products remained the largest item in India's export basket during 2012-13, accounting for a fifth of outbound shipments and rising 7.7 per cent to $60.3 billion in 2012-13 from $56 billion the previous year, enabling the total exports to exceed $300 billion.

However, these items could not arrest a contraction of India's overall exports by 1.8 per cent, from $306 billion in 2011-12 as the country's largest trade partner, the European Union, crawled to recover from an economic downturn.

Last year, only six product categories accounted for an export realisation of over $10 billion each. Four of these recorded growth and the other two contracted in 2012-13 year-on-year, according to figures compiled by the Directorate General of Commercial Intelligence and Statistics (DGCIS).

Exports of drugs, pharmaceuticals and fine chemicals, facing rough weather in recent times, rose 10.5 per cent to $14.6 billion from $13.2 billion in 2011-12. This was almost five per cent of total exports. In the capital goods sector, machinery and instruments' exports went up six per cent to $15.2 billion from $14.3 billion the year before. Metal exports moved up five per cent, to $10 billion from $9.5 billion in 2011-12.

However, outbound shipments of transport equipment fell 14 per cent at $43.4 billion in 2012-13. High-value gems and jewellery exports also saw a contraction by over three per cent at $43.4 billion in 2012-13.

Ajay Sahai, director-general of the Federation of Indian Export Organisations, attributed the decline in India's exports to a fall in high-value items, gems and jewellery being one. These items, he says, show "a declining trend. They were exported in good numbers earlier". Among those fetching less than $10 bn, engineering goods rose 13 per cent to $347 million in 2012-13. Electronic goods, on the other hand, saw their export coming down nine per cent to $8 bn. Outbound shipments of computer software in physical form contracted 25 per cent to $386 mn. A significant laggard among traditional export items were textiles. Exports of cotton ready-made garments declined to $8.4 billion in 2012-13 from $9.6 billion the previous year, silk ready-mades to $238 million from $266.6 million and readymade wool fell to $296 million from $350 million.

"Textiles is one sector where we are not doing well when it comes to export of high-value products and so is the case with engineering goods. They were exported in good numbers earlier," Sahai said. Equally significant was the fall in iron ore exports, which declined 65 per cent to $1.6 billion in 2012-13 from $4.6 billion a year before, due to the court orders on ore mining.

"It is a conscious policy of the government to discourage the export of iron ore and, hence, the decline is not of much relevance to India now. It is time to look at value added products rather than iron ore. We should start exporting more iron and steel, rather than ore. Everybody has to move up the value chain," said Sahai.

Exports of semi-finished iron and steel declined moderately to $5 billion in 2012-13 against $5.2 billion the previous year.

Mid-caps can be less volatile in the long run: CRISIL

The CNX Nifty Index, comprising large-cap stocks, returned 19 per cent in the same period, the Crisil report says

Mid-cap companies may not only be less volatile, but also offer higher returns than large-cap companies over longer periods of time, according to a report by the research arm of rating agency, CRISIL.

A study of returns over a 10-year-period has revealed that the CNX Midcap Index gave annualised returns of 23 per cent over a 10-year-period ending March 2013. The CNX Nifty Index, comprising of large cap stocks, returned 19 per cent in the same period, the CRISIL report says.

Volatility was also lower for the CNX Midcap Index compared to the CNX Nifty, it noted.

Sandeep Sabharwal, senior director, Capital Markets, CRISIL Research noted that lower volatility extends across many time periods.

"Over other periods of analysis, viz., three, five and seven years, the mid-cap index was less volatile while it outperformed the CNX Nifty Index over a five-year time-frame," he said.

Also, mutual funds with focus on smaller companies tend to be less volatile, according to CRISIL.

"Small and mid-cap equity funds were less volatile than large-cap funds across three-, five- and seven-year time frames. The former also generated higher returns over multiple periods," said the report.

Mukesh Agar-wal, president, CRI-SIL Research, suggested that greater diversification could be the key.

"While the CNX Midcap Index has exposure to 29 industries, the CNX Nifty Index constitutes 17 industries. In terms of concentration, there are only four industries with more than five per cent exposure in the mid-cap index compared to nine for the CNX Nifty Index," he said.

The mid-cap index also has a higher weightage to defensive sector stocks, which fall less during a bad market, at 23 per cent compared to 10 per cent for the Nifty. Defensive sectors include healthcare and companies with a focus on consumption.

Reliance Industries gains on new gas find in KG-D6 block

Reliance Industries (RIL) is trading higher over 2% at Rs 805 on reports that the company and its partners BP and NIKO have struck a significant gas and condensate discovery in the KG D6 block.

The discovery named D-55 lies over 2000 meters below the already producing reservoirs in D1-D3 gas fields. The company however has not stated the amount of possible reserves the discovery may hold but the discovery has been notified with the government authorities

RIL is the operator of KG-D6, with 60% equity. BP has a 30% share and Niko holds the remaining 10%.

The stock opened at Rs 803 and hit a high of Rs 807 in early morning trades on BSE. A combined around 90,000 shares have changed hands on the counter so far on BSE and NSE.

India' GDP growing below potential: Moody's

After S&P retained the lowest investment grade for India a week back, rating agency Moody's, in a statement on Thursday, said that the Indian economy is growing below its potential.

The rating agency said, "The government believes India can grow at an 8% pace if everything goes according to script. We think this is unlikely, seeing India’s potential growth rate at around only 7%; anything higher will fan inflation."

Prime Minister Manmohan Singh, on the occasion of 9 years of completion of the UPA Government on Wednesday, affirmed that if bought to power in 2014, the 8% growth rate could be achievable.

Read more: 8% growth possible if UPA is voted to power again: PM

"Though 8% growth is difficult, it is not impossible. We have done it before, and if we receive a mandate next year, we will certainly achieve it once again", he had said.

On another note, the rating agency said that the reforms bought in by the Government recently could set the pace for growth later this year.

"The government’s economic reforms through the second half of 2012, coupled with lower interest rates, should lift India's growth pace through the second half of 2013, but it will be some time before the economy is expanding at its potential rate.", the rating agency said, further stating that the days of 8% annual GDP growth in the country are "long gone".

It added, "GDP growth should steadily improve across 2013, initially as stalled investments are restarted and then later as sentiment starts to improve, lifting investment and consumer spending. Yet the recovery will be gradual, with GDP growth hitting a pace just above 6% by the end of this year"

Terming reform measures such as FDI in aviation and retail as welcoming moves, the agency said, "These demonstrate that the government is pro-growth. But it is not yet clear that this will be enough to lift investment in 2013 and 2014. Global businesses are no longer willing to overlook the difficulties of doing business in India. In a more skeptical investment environment, the government’s efforts, including lower interest rates, may only have only a marginal impact on sentiment and investment."

Inflation falls; will interest rates follow?

Wholesale inflation falls below 5%; all eyes on RBI as markets seem convinced that interest rates have peaked

India’s wholesale price inflation decelerated below the 5% mark for the first time in three-and-a-half years in April, stoking hopes that the central bank will respond with another interest rate cut when it undertakes a policy review next month.

Inflation based on the Wholesale Price Index (WPI) slowed sharply to 4.89% in April from 5.96% a month ago because of a substantial decline in prices of food and manufactured products. While food inflation slowed to 6.08% in April from 8.73% in March led by a decline in vegetable prices, core inflation, or non-food, non-fuel manufacturing inflation, also decelerated for the sixth consecutive month to 2.7% in April, below the 3% comfort level of the Reserve Bank of India (RBI).

Retail inflation based on the Consumer Price Index (CPI) had slowed to 9.39% in April from an average 10.2% in the fiscal year ended 31 March on the back of declining food prices, data released on Monday showed.

Inflation has played spoiler in the India story. It has forced up interest rates, discouraged investment, even squeezed consumption demand.

Financial markets now seem convinced interest rates have peaked. The benchmark 10-year bond yields closed at an almost three-year low following the decline in inflation numbers, falling to 7.47%, the lowest since 7 June 2010. The bond yield closed at 7.58% on Monday.

Economic affairs secretary Arvind Mayaram made a case for further rate cuts by RBI to boost growth. “We do believe that RBI would look at this figure (April inflation),” he said.

National Statistics Commission chairman Pronab Sen said the current easing of inflationary pressure is a result of softening global commodity prices and producers losing pricing power due to a fall in the real income of consumers.

“The trend in wholesale price inflation will continue and will subsequently lead to a decline in retail inflation with a lag as producers are always the first ones to lose inflationary expectation,” he added.

Although rapidly moderating inflation and depressed economic activity warrant aggressive monetary easing, the higher-than-sustainable level of the current account deficit and political uncertainty in an election year (which could prevent the government from reining in spending) have stayed RBI’s hand. India’s economic growth is estimated to have slumped to 5% in the last fiscal, the slowest in a decade.

Credit rating agency Standard and Poor’s said in a report released on Tuesday that India remains an outlier in the Asia- Pacific region with growth still decelerating and consumer inflation at an elevated level. The agency has projected gross domestic product growth of 6% in 2013, 6.7% for 2014 and 7% for 2015. However, it said for India, a downside scenario featuring a combination of weaker global risk appetite and a poor monsoon season could pull growth down to around 5% in 2013, 5.5% in 2014 and 5.7% in 2015. “Upside growth would reach 6.5% in 2013, 7.2% in 2014 and 7.6% in 2015,” it added.

Even though RBI has cut policy rates by 125 basis points since April last year, it has maintained a hawkish tone by maintaining that there is “little space for further monetary easing” given the uncertainty surrounding the dynamics of inflation and the current account deficit. A basis point is one-hundredth of a percentage point.

However, if inflationary pressure continues to ease, analysts say the central bank will have more headroom to cut policy rates by an additional 50 basis points in 2013-14.

Abheek Barua, chief economist at HDFC Bank Ltd, said that in the current environment, RBI is in a better position to justify a rate cut and should take advantage of this. “We expect a 25 basis points rate cut by RBI in its mid-quarter policy review on 17 June, which could be coupled with a cut in cash reserve ratio to ease (the) liquidity situation,” he added.

RBI expects inflation to average around 5.5% in 2013-14 “with some edging down in the first half on account of past policy actions, although there could be some increase in the second half, largely reflecting base effects”. In 2012-13, WPI-based inflation averaged 7.4%.

However, the central bank is expected to keep a close eye on the rising trade deficit and the current account deficit. Data released on Monday showed the trade deficit widened, reversing a downward trend, to $17.8 billion as gold imports surged 138% to $7.5 billion.

Mayaram said the high level of gold imports is an aberration. “I believe we will see correction by next month. And we don’t believe imports are going to be at the same level,” he added.

RBI expects food prices to put pressure on inflation because of persisting supply imbalances. “Also, the timing and magnitude of administered price revisions, particularly of electricity and coal, will impact the evolution of the trajectory of inflation in 2013-14,” the central bank said in its monetary policy statement.

Significant revisions in provisional inflation numbers, with the February headline inflation rate revised to 7.28% from 6.84% reported earlier, are also expected to be of concern to RBI.

March factory output growth accelerates to 2.5%

India's industrial production growth accelerated to 2.5% in March from a year earlier, government data showed on Friday.

The government revised the output growth for February to 0.5% from 0.6% earlier.

Manufacturing, which constitutes about 76% of industrial production, grew 3.2% from a year earlier, the statistics office said. Capital goods production, a barometer for investments in the economy, grew an annual 6.9% from a year earlier.

In the April-March period, industrial production expanded an annual 1%.

Highlights:

Manufacturing sector growth at 3.2% vs -3.6% y-o-y

Electricity sector growth at 3.5% vs 2.7% y-o-y

Mining sector growth at -2.9% vs -1.1% y-o-y

Basic goods growth 2.6% vs 1.1% y-o-y

Capital goods growth 6.9% vs -20.1% y-o-y

Intermediate goods growth -0.2% vs 0% y-o-y

Consumer goods growth 1.6% vs 1.1% y-o-y

Consumer durables growth at -4.5% vs 1.2% y-o-y

FII interest in Indian stocks revives after subdued April

Analysts expect market to show an upward bias with continuing foreign inflows but are ruling out a bull run

Foreign institutional investors, or FIIs, are showing renewed interest in Indian stocks, a trend that drove the benchmark BSE Sensex past the 20,000-mark in intra-day trade on Wednesday though it closed at 19,990.18 points. FII net monthly investments had tumbled to their lowest in nine months in April.

Analysts expect the market to show an upward bias with continuing foreign inflows but are ruling out a bull run till macroeconomic issues are resolved to instill enough buyer confidence that can sustain the momentum.

FIIs have been buyers of Indian equities for 13 straight sessions, from 16 April till 7 May, and pumped in $12.2 billion (around Rs.67,100 crore today) since the start of the year till 7 May, data from capital markets regulator, the Securities and Exchange Board of India or Sebi showed.

However, FIIs injected a mere $951.4 million in April—the lowest in nine months, compared to $2.1 billion in March and $4.1 billion each in January and February.

FIIs were sellers in all except two sessions in the first two weeks of April, selling a net of $283.8 million, after which they became buyers in all sessions in the second fortnight of April, pumping in $6.7 billion. Their net investments in first four sessions of May is $869.2 million.

In a report on Wednesday, Citigroup said FII ownership in the top 500 companies has hit an all-time high of 21.2%, climbing 128 basis points in the March quarter and, counting the foreign promoters’ 7.6% stake the foreigners are now the most dominant shareholders. A basis point is one-hundredth of a percentage point. Dealers said investor interest in Asia’s third largest economy got a boost after finance minister P. Chidambaram, wooed investors in the US and Canada in mid-April. Falling commodity prices also led to hopes that the current account deficit (CAD) situation could get better. “Flows will continue into our country as the macro situation is improving because of lower crude oil prices, though some problems remain,” Nirmal Jain, chairman of India Infoline Ltd, said in a phone interview.

The BSE benchmark Sensex closed 0.5% higher at 19,990.18 points on Wednesday, after rising past the 20,000 mark in intra-day trading for the first time since 31 January, after the Congress won a majority in the Karnataka assembly elections.

The National Stock Exchange or NSE’s 50-share Nifty index gained 0.4% to close at 6,069.30 points. The market is a few points shorter of its 52-week high levels of the Sensex at 20,204 points and Nifty at 6,111 points.

“We see upsides, but not a bull market,” Citigroup analysts Aditya Narain and Jitender Tokas said in a note on Wednesday.

“We continue to be optimistic on the market, seeing +5% to Dec’13 (Sensex target of 20,800), and believe there should probably be a little more of a stock than sector emphasis. The strong January–March’13 helps, but more is needed to get to those market levels, and a slowing of domestic outflows—which we expect to some extent—could make a material difference,” they said.

“While foreign flows have been very strong, FII portfolio stance seems to have turned more conservative, with higher allocations (relative to benchmark) to energy, telecom and healthcare, and lower allocations to the stronger performing/larger financials and IT (information technology,” Citigroup analysts said in a note.

India Infoline’s Jain, too, did not rule out a correction after the rally. “The bias is upwards, but it (the market) will see some brief correction after the rally. Parliament is not functioning well, we are seeing adjournments which is hindering the pace of reforms,” Jain said

However, even as FIIs pumped in money from the start of the year, the benchmark Sensex has gained only 2.9%. Experts attribute the decline to lack of active buying on the behalf of domestic investors, even as their selling has slowed. Structural issues continue to dog investors. Though falling commodity prices, including crude oil and gold, are expected to provide some respite to the CAD situation, it remains to be seen how the macroeconomic situation plays out, say analysts.

CAD had touched a record high of 6.7% in the December quarter. Domestic investors, too, have slowed down their selling. Their net sales of equities in April was the lowest since June at Rs.2,701.1 crore.

“It (the rally) is all about global money pouring in. However, domestic investors are still not around even though selling may have slowed. There is hardly any money coming from retailers, except from some interest in mid-cap space,” said Gautam Trivedi, managing director and head of equities (India), Religare Capital Markets Ltd.

“The manufacturing PMI (purchasing manager’s index) touched 17-month low. There are too many uncertainties until the next year. Possibility of an early election is not ruled out. Overall, earnings are weak,” Trivedi said.

Foreigners buy most Indian stocks since Feb

The flows have helped the benchmark S&P BSE Sensex rebound 8.5% from a seven-month low reached April 9

Foreign funds bought the most Indian shares last week since February, as the nation reduced interest rates for the third time this year and developed markets maintained or bolstered stimulus programs.

Foreigners bought $802 million more of local stocks than they sold in the week ended May 3, the most since the period ended February 8, data from the regulator show. The purchases took this year's net inflows to $11.8 billion, the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan. The flows have helped the benchmark S&P BSE Sensex rebound 8.5 per cent from a seven-month low reached April 9.

The Sensex capped a third week of gains May 3, its longest stretch of weekly advances since December, as the Reserve Bank of India cut rates by 25 basis points. Lower borrowing costs from Europe to the US and Japan have stoked inflows into India. The European Central Bank trimmed rates to a record low last week and the Federal Reserve said it will keep buying $85 billion of bonds a month to stimulate the US economy.

"India continues to be a big beneficiary of the easy monetary policy that global central banks are following," Arun Kejriwal, director at Kejriwal Research & Investment Services, said by phone from Mumbai. "So long as global liquidity remains strong, flows are likely to continue."

The Sensex rose 1.09 per cent, or 215 points to 19,888.95 points in Mumbai in a second day of gains, poised for the highest close since January 31. While the Reserve Bank of India cut key rates last week, Governor Duvvuri Subbarao said in an interview with Bloomberg TV India May 4 that the possibility of further easing is "practically non-existent."

RBI lowered the repurchase rate to 7.25 per cent from 7.50 per cent after data April 15 showed that the wholesale-price index, a measure of inflation, slowed to a 40-month low in March.

Such a Good Fall: Oil & Gold Booms Are Over

The plunge in commodity prices is one of the best signs yet that the global economy is returning to normal 

The wreckage caused by Chinas great,juddering slowdown continues to spread far beyond the countrys shores.Although most commodities enjoyed a bounce on May 3,after better-thanexpected US employment data,the plunge in their prices over the past few months suggests the past decades rally is truly broken.For those of us not in the mining industry,this is good news one of the best signs yet that the global economy is returning to normal.

CHINACOMMODITY CONNECTION 

Chinas voracious demand for every conceivable raw material oil,steel,soybeans,gold,to name a few once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations.This was a Malthusian vision of scarcity: rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources.Gas prices would never come back down;gold would cost thousands of dollars an ounce.The response,for many,was to bet big on China.Because it is hard to buy directly into China,many bought into the commodities that were being sucked into the gaping maw of the countrys economy: oil from Russia,iron ore from Australia and so on.The China-commodity connection was born.Financial entrepreneurs started exchange-traded funds,which allowed individual investors to trade commodities,including silver and gold,as if they were stocks.For the first time,US pension funds allocated a share of their holdings to commodities.Even the Federal Reserve got involved,inadvertently,by printing so much money that a good portion of it wound up fuelling speculative bets on China and the big emerging markets,often using commodities as a proxy.

SUPERCYCLE BEGINS 

Prices went parabolic.From 2000 to 2011,copper prices rose 450%,oil 365%,and gold more than 500% to a high of over $1,900 an ounce.There was talk of oil hitting $200 a barrel,and gold reaching $10,000 an ounce.It was a wild time,all predicated on the idea that the rise of China had set off a commodity supercycle that could keep prices high indefinitely.Commodity prices,such as that of gold,tend to rise when faith in the financial system is in decline and usually fall when confidence is high.In this they resemble the politician of whom Winston Churchill once said: He has all the virtues I dislike and none of the vices I admire. High commodity prices enrich a class whose corrupting influence is legend,and whose chief skill is the ability to secure the right political contacts.Meanwhile,high commodity prices,particularly for oil,squeeze the poor and the middle class,and act as a brake on growth in the industrial world.Thats why falling commodity prices both gold and copper are still down more than 10% this year despite the latest bounce are good news.The China-commodity connection is breaking.After three straight decades of ultrafast growth,Chinas slowdown has let air out of the bubble: since the peak in April 2011,the broadest available measure of commodity prices has fallen 16%.In recent months,money has started flowing out of exchange-traded funds for most commodities.

FLATTENING DEMAND 

The Malthusian spectre of rising demand and shrinking supply has been replaced by a new realisation that,for most commodities,demand is flat and supply is rising fast.Oil demand in developed nations has been stable since 1995,because high oil prices have inspired conservation efforts in countries such as Japan and the US.Now,as emerging nations begin to embrace energy efficiency as well,global demand might flatten out this decade.Certainly,the world is no longer terrified of running out of important commodities.High prices have drawn investment to copper mines,aluminium smelters and other basic sources of supply.In the past decade,the amount of capital invested in the energy and materials sector,which includes most nonfarm commodities,has risen 600%,compared with an average increase of 200% in other sectors.The much-discussed boom in US shale-gas production is only one result of this spending: since 2001,China has increased output of industrial metals by striking multiples,from about 140% for iron-ore commodities to 775% for nickel.

JUST NORMAL CYCLE 

This is part of the normal cycle of the world economy,not a supercycle.Commodity-price booms restrain demand,while attracting money and innovation to increase supply,which leads to a bust.For the last 200 years,the average price of commodities has followed this predictable cycle: one decade up,often sharply,followed by two decades down,with the result that real prices havent risen since 1800.There are exceptions.Some commodities,including oil and copper,have gained somewhat in real terms.But gold has just retained its value.The price today (about $1,500 an ounce) is roughly the same as in 1980,when adjusted for inflation.If the historical pattern holds,we are now entering a long period of falling commodity prices,which could last two decades.That is good for importers such as the US,as was the case in the 1980s and 1990s when commodity prices were falling.Meanwhile,the nations that have revelled in the commodity boom of recent years are likely to face a disheartening return to the mundane ordeals of normal life.Buddhist monks have a phrase for it: After the ecstasy,the laundry.

Weekly Stocks Outlook

Bank Stocks Outlook:  

Bank stocks are likely to remain range-bound with a negative bias in the coming week on likely selling pressure following the Reserve Bank of India's hawkish guidance at its annual policy statement on Friday, analysts said.

    

Most banks have indicated they will not be able to cut loan or deposit rates despite the policy easing by the Reserve Bank of India as deposit rates are high due to weak deposit growth.

   

Capital Goods Stocks Outlook: 

Shares of most capital goods and engineering companies are seen range-bound next week due to absence of any major triggers, dealers said.

    

Shares of sector bellwether Larsen & Toubro could see marginal gains, as investors remain confident of the company meeting its order inflow guidance for 2012-13 (Apr-Mar).

Oil Stocks Outlook:

Shares of state-owned oil marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--are seen range-bound next week, but the bias will be positive as crude prices continue to soften amid slight strengthening of the rupee.

    

The Indian basket of crude oil fell below $100 a barrel this week while the rupee ended above the sentimentally positive 54-for-a-dollar mark.The combined effect of the two is seen significantly positive for the public sector oil refiners.

  

Steel Stocks Outlook: 

Shares of major steel companies are seen extending gains next week on expectations that the 25-basis-points repo rate cut by the Reserve Bank of India today will spur investments, analysts said.

Auto Stocks Outlook:

Shares of major automakers look positive and mostly range-bound for the coming week, analysts from various domestic brokerages said.

   

Maruti Suzuki is seen moving in a narrow range, and looks positive for the coming week, but sideways for a few weeks to follow, an analyst said.He said correction was expected in the stock after a rally following the depreciation of Yen.

    

Cement Stocks Outlook:

Shares of major cement companies are seen rangebound with a negative bias in the coming sessions, reacting to the poor earnings posted by sector major Ambuja Cement today, analysts said.

    

But the downside is likely to be limited as earnings of ACC offered some positive signals for the sector.

  

Telecom Stocks Outlook:

The bull run in the Reliance Communications Ltd's shares, which have nearly doubled since last month, is likely to continue next week.

    

The shares of Reliance Communications Ltd spiked after a 12-bln-rupee optic fibre network deal with Reliance Industries Ltd was signed on Apr 2. Investors'expectations that more such deals, including a tower-sharing agreement, may be in the offing, helped the scrip zoom.

    

Pharma Stocks Outlook:

Shares of major pharmaceutical stocks are likely to track the broad market next week with stock-specific actions seen for companies detailing their Jan-Mar earnings during the next five sessions.

    

GlaxoSmithKline Pharma, Glenmark Pharmaceuticals, and Ranbaxy Laboratories would report their earnings next week.

FMCG Stocks Outlook: 

Stocks of major fast moving consumer goods companies are likely to be muted in the week ahead after outperforming this week, both technical and fundamental analysts said.

    

FMCG stocks gained significantly this week on the back of Unilever Plc's open offer to increase its stake in Hindustan Unilever Ltd. Analysts believe the recent run-up in prices is a good opportunity for investors to book profits.

IT Stocks Outlook: 

Shares of major information technology companies are seen rangebound next week but with a positive bias, as they consolidate after the previous week's fall on uncertainties and worries arising from the draft US immigration bill as well as mixed Jan-Mar results.

   

Highlights of RBI's Monetary Policy Statement for 2013-14

Following are the highlights of the Reserve Bank of India's Monetary Policy Statement for 2013-14 (Apr-Mar):

MAIN HIGHLIGHTS 
* Repo rate cut by 25 bps to 7.25% with immediate effect
* Reverse repo rate adjusts 25 bps lower to 6.25%
* MSF, Bank Rate adjust 25 bps lower to 8.25%
* CRR remains unchanged at 4%
* HTM holdings of banks' SLR to be capped at 23% of deposits
* HTM to be lowered via at least 50 bps reduction every quarter
* Lowering of HTM holdings effective Apr-Jun
* FY14 GDP growth projected at 5.7%
* Mar 2014 WPI inflation seen around 5%
* M3 growth projected at 13% for FY14
* Banks' FY14 deposit growth projected at 14%
* Banks' FY14 non-food credit growth projected at 15%
* To detail mid-quarter policy review on Jun 17
* To detail Apr-Jun policy review on Jul 30

GUIDANCE 
* Recent monetary action by itself, can't revive growth
* Monetary steps need to be supplemented by improved governance
* Need steps to ease supply bottlenecks, up public investment
* Need continuing commitment to fiscal consolidation
* Upside risks to inflation still significant in near term
* Can't afford to lower guard against resurgence of inflation
* Must be alert to risks from current acct gap, its financing
* Current acct gap risks could warrant swift reversal of stance
* Little space for further monetary easing
* Balance of growth-inflation risks leave less room for easing
* Will endeavour to actively manage liquidity

STANCE 
* After Mar review, room for further easing was quite limited
* Growth has decelerated continuously, steeply
* Activity may be subdued in Apr-Sep, modest pickup seen Oct-Mar
* Headline WPI close to tolerance threshold
* Food price pressures persist, supply constraints are endemic
* Policy to continue addressing accentuated risks to growth
* Policy to guard against risk of inflation resurgence
* Policy to manage liquidity to ensure adequate credit flow

TWIN DEFICITS 
* Biggest risk to economy stems from current acct gap
* Sustainable level for current acct gap near 2.5% of GDP
* Fiscal deficit, although programmed to ease, is still high
* Large fiscal gap can spill over into current acct deficit
.

No Turnaround for Auto,Sales Slip 7-8 % in April

Passenger car segment records a steeper decline of 9-10 %;hike in excise duty on SUVs adds to woes 

The trend in the passenger vehicle industry continued to wobble in April the start of the new financial year,continuing from where it left last fiscal,when Indias car market saw sales falling 6.7%,the first drop in 12 years.Adding to the woes,an increase in excise duty on sports utility vehicles effective from April also pulled down the growth of the fastest-growing utility vehicle space.ET learns the overall passenger vehicle market,which includes utility vehicles,has posted a decline of 7- 8% with sales of about 2.02 lakh units,while passenger cars have posted a steeper decline of 9-10 % (1.53 lakh units approximately).This is over a low base of April 2012.

Domestic two-wheeler sales for April,however,grew by 1-2 %.While Maruti Suzukis sales for April 2013 were flat,Hyundai India,Tata Motors,and Toyota Kirloskar posted a decline of 7%,49% and 37%,respectively.Senior industry executives that ET spoke to aver that had it not been for the festivals of Navratri,Ugadi,Vishu,Bihu or Gudi Padwa in various parts of the country,the decline in sales would have been even steeper.

The automobile industry have initiated measures to correct production and inventory.The volumes are falling despite launching new variants and facelifts,they said.Whats worrying the industry is that even the utility vehicle segment that drove the overall market with over 50% growth last fiscal has hit a speed breaker,with volumes growing in lower single digits after the excise duty increase in the Budget.

Excluding Quanto,M&M posted a 2-3 % decline in UV sales.Maruti Suzukis UV sales fell 5% in April 2013 with sales of 5,318 units,and Toyota Kirloskar posted a decline in UV sales (Toyota Fortuner and Innova) of 30-40 % in wholesale despatches,whereas retail sales were much better with the company posting a decline of 10-11 % Pravin Shah,chief executive,automotive division at Mahindra & Mahindra,said,We are extremely disappointed that the additional 3% excise duty on SUVs has not been reversed in the Finance Bill.If it had been reversed,it would have brought some cheer and momentum for SUV makers and provided them with a level playing field. We remain cautiously optimistic of the current situation and do hope that with a likely cut in interest,the auto industry will look up, Shah added.Sandeep Singh,deputy MD & COO,marketing and commercial at Toyota Kirloskar,said,The market continues to be sluggish and is expected to take some time to revive.We have taken measures to reduce inventory,both at our end as well as at the dealers end. There are few products in the market,which are selling without a discount.The environment is so tough that the companies are in a Catch-22 situation prolonging discount is hurting the bottomline,and without discount,volumes are not taking off,leading to piling up of inventory.It is a tough balancing act right now, said a senior executive of an MNC,requesting anonymity.

The growth in the market is only seen on account of specific models like Renault Duster,Maruti Suzuki Dzire and now Hondas new compact sedan Amaze,which has got off to a decent start.Jnaneswar Sen,senior VP marketing & sales at Honda Cars India,said,Amaze has received tremendous response from customers despite the slowdown in the industry.We are confident that Amaze will drive our growth in this fiscal. However there are some who see the glass as half full.Despite the overall glum environment,there is a glimmer of silver lining emerging.According to Rakesh Srivastava,senior VP,marketing and sales at Hyundai India,the market will bottom out soon.While the overall market continues to remain under pressure,the silver lining is: demand for petrol cars is gradually recovering (with falling petrol prices).

As for Hyundai,we are producing to our full capacity strategically balancing between exports and domestic sales,targeting high growth rates in exports while also increasing substantial market share in the domestic arena, said Srivastava.In the two-wheeler space,while Hero MotoCorp and TVS Motor Company have posted a decline of 9% and 5.5%,respectively,the Japanese two-wheeler majors Honda Motorcycle and Scooters India (HMSI) and India Yamaha Motor have bucked the trend.HMSI posted record sales of over 2.49 lakh units in April 2013 growing by over 29% year on year,whereas Yamaha grew by 33%,led by its new scooter Ray.YS Guleria,senior VP,sales & marketing at Honda Motorcycle and Scooters India,said, We have posted a growth of 30% backed by strong demand for our automatic scooters and new launches. Experts say the impetus from the government on increased investment in infrastructure and opening up mining in some states have brought in fresh enquiries for trucks.But the results are mixed so far.While Tata Motors posted 5% growth in domestic commercial vehicle sales,Eicher posted a decline of 7% in April.