Global financial markets turned negative on fears about a global trade war, with Trump going on the offensive on Chinese goods. President Donald Trump announced on Thursday that he would impose tariffs worth US$ 50 billion on Chinese goods. The US markets were down by 5.7% for the week.

The Chinese government also retaliated with its own plans to import taxes on US products worth US$ 3 billion. China plans to add 15% tariffs on US steel pipes, pork, fruit wine and other products. The Chinese index was down 3.6% in the week gone by.

Other Asian markets also traded lower on the back of rising uncertainty amongst the world's two largest economies. Japan's CPI data came in at 1% in February, far away from its target of 2%. Japanese markets were down by 4.9% for the week.

Key World Markets During the Week

Back home, Indian share market also ended the week lower amidst the trade war fears. The Indian PSU economy has been reeling on the back of the PSU banking scam that broke out in the previous month. The decline was further exaggerated due to selling by Foreign Institutional Investors (FII). The Indian stock market ended the week lower by 1.7%.

On the sectoral indices front, Realty and metal stocks were the major losers during the week.

BSE Indices During the Week

Now let us discuss some key economic and industry developments during the week gone by.

As per an article in a leading financial daily, the Reserve Bank of India's (RBI) data on performance of the private corporate sector has showed that India's manufacturing sector witnessed an improvement in sales growth in the period October-December 2017-18 (Q3) on annual basis.

However net profit has remained subdued due to lack of support from other/non-operating income. It noted that during Q3 of FY18, manufacturing companies' sales surged by 14% as compared to the similar period of the previous fiscal period while net profit of these companies declined by 2.4%.

Further, the services (non-IT) sector showed signs of revival as reflected by positive sales growth. According to the data, the information technology (IT) sector also registered modest improvement in sales growth, although lower than in the previous year.

Besides, it pointed out that among major manufacturing industries, demand conditions improved for chemical and chemical products; cement and cement products; machinery and machine tools; and motor vehicles and other transport equipment.

The data further stated that operating profits of the manufacturing sector were supported by improved demand conditions and continued to record a healthy growth, despite significant increase in input costs.

It also said that pricing power in terms of the net profit margin declined for the manufacturing sector, while it improved for the services (non-IT) sector.

Moving on to the news from the steel sector. India has exported 8.22 million tonnes (MT) of finished steel during April-January of 2017-18.

As per data provided by Minister of State for Steel, the country had exported 8.24 MT during 2016-17 and 4.08 MT in 2015-16.

As against exports, the imports were lower at 6.45 MT during April-January of 2017-18. The country imported 7.23 MT in 2016-17 and 11.71 MT during 2015-16.

Besides, the minister said that government does not control or regulate the pricing of iron ore or any other raw materials in the country.

Notably, India's steel industry was just coming out of a rough patch.

Demand was picking up. Steel prices were on the rise. Buyers were lining up to pick up stressed assets. With the expected pick up in the investment cycle, the sector was on the upswing.

Then Donald Trump spoiled the party. The US government plans to impose a 25% tariff on steel and a 10% tariff on aluminium.

India produces a lot of both commodities but internationally, we are not a big player. The US imports only 2.4% of steel and 2% aluminium from India.

But it's not so simple. With the new US tariffs, major exporters like South Korea will look to sell in other countries. This would lead to a glut and as a result, lower prices. This could threaten the nascent recovery in the industry.

Domestic credit rating agency, ICRA also, in its latest report has said that the US president's recent move to impose a 25% tariff on all steel imports is unlikely to have any significant impact on the domestic steel industry in the medium term.

It noted that the tariffs will take effect on March 23, 2018 and would be effective on all countries except Canada and Mexico which together comprises about a quarter of the total US imports.

According to the report, the impact of import tariffs may not be significant in the medium-term due to reasons like global steel demand (ex-USA) is expected to increase by 25 MT in calendar year (CY) 2018.

It noted that India's steel exports to the USA market remained a meagre 0.7 MT in CY2017, accounting for less than 1% of India's domestic demand. Therefore, it pointed out that Indian steel mills should be able to find an alternate market for its nominal US export volumes without much difficulty.

The rating agency further stated that Chinese steel exports has been steadily declining in the last two years, reaching 75 MT in CY2017 from the peak level of 112 MT in CY2015, and in the current year too, exports have continued to shrink, declining by 27.1% in the first two months of CY2018. It also noted that this trend is expected to continue throughout CY2018 on the back of a resilient Chinese domestic demand and proposed steel capacity cuts.

Movers and Shakers During the Week

Source: Equitymaster

Key corporate developments last week

From the automobile sector, market participants will keep tabs on Tata Motors' share price as the company plans to bring in new products in order to have presence in around 95% of Indian passenger vehicles market by 2020. The company currently sells a range of vehicles from hatchback to SUVs playing in about 70% of the market in India. With the addition of new products and enhanced play in the segment, the company would be able to ramp up its market share, which currently stands at around 7%.

From the Pharmaceuticals sector, Shilpa Medicare share price will also be in focus this week. The stock witnessed buying interest after it stated that the US Food and Drug Administration (USFDA) issued an Establishment Inspection Report (EIR) for the company's formulations manufacturing facility (SEZ unit) located at Jadcherla, Telangana.

Lupin's share price was also in focus last week. The stock of the company witnessed buying interest yesterday as the company received final approval for its Desoximetasone Topical Spray, 0.25%, 30 ml, 50 ml, and 100 ml from the United States Food and Drug Administration (USFDA) to market a generic version of Taro Pharmaceuticals USA Inc.'s Topicort Topical Spray, 0.25%.

Moving on to the news from the FMCG sector. As per an article in a leading financial daily, Godrej Agrovet Ltd is planning to bid for Ruchi Soya Industries Ltd, which is undergoing bankruptcy resolution, with an eye on its palm oil business.

A bid would mark Godrej joining the race for Ruchi Soya, in which companies such as Patanjali Ayurved Ltd, ITC Ltd and Emami Ltd have evinced interest.

According to the report, the company, which is currently undergoing bankruptcy proceedings, has received as many as 26 applications from Indian and foreign conglomerates to acquire a 51% stake.

In December 2017, NCLT's Mumbai bench admitted Ruchi Soya's insolvency resolution process under the Insolvency and Bankruptcy Code, 2016, following petitions by Standard Chartered Bank and DBS Bank.

Ruchi Soya is among the 26 companies on the second list of bad loan accounts that the Reserve Bank of India sent to banks last year asking them to conclude a debt resolution.

In the news from energy sector, state-owned Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) may buy 26% stake each in gas utility GAIL India Ltd, paying the government over Rs 200 billion each to become integrated energy firms.

Following Finance Minister Arun Jaitley's 2017 Budget announcement of creating integrated oil majors, IOC and BPCL have submitted separate proposals to buy the government's 54.89% stake in GAIL.

Reports stated that as the government is not looking at actual merger of oil companies but only transfer of its ownership to a cash rich PSU, the best option would be to split the 54.89% holding in GAIL equally between IOC and BPCL.

The move comes after Oil and Natural Gas Corp (ONGC) bought out government's 51.11% stake in refiner Hindustan Petroleum Corp Ltd (HPCL) for Rs 369.15 billion.

Finance Minister in 2017-18 budget had unveiled government's plan to create integrated public-sector oil majors "through consolidation, mergers and acquisitions".

The Nifty 50 Index traded on a negative note during the week.

On Monday, it opened the session up but slipped lower to end the session 100 points down. It opened to gap down on the next trading day but recovered sharply and traded positive until mid-week. But the bulls couldn't hold the gains and the index continued to slip lower. On Friday, the carnage continued as the index opened 146 points gap down on back of global markets sell-off. It finally ended the weekly session 2% down.

Last week, we saw the index trading close to the 200 day moving average (DMA) which could have acted as a good support. But it broke below the 200 DMA. In fact, the index closed just below the 10,000 - 10,100 zone which acted as a good support in the past.

So does this indicate that the index will continue to slip lower? In that case, 9,700 is level to watch out for.

Nifty 50 Index Witnesses Selling Pressure