Markets in holiday mood

Holiday mood seems prominent the way stocks across Asia are trading this morning. Marginal gains/losses are seen across indices. While stocks in Hong Kong and China are in the red, gains are being witnessed in Japan and Singapore. The US markets also closed with marginal gains yesterday.

The country which taught the world new ways to operate and profit in the automobile industry is now seeing dark spots in its own automobile demand. Bloomberg has reported that the Japanese automobile industry is facing its severest crunch in 40 years as US slowdown has depressed demand. As per statistics released by Japan Automobile Manufacturers Association, vehicle production plunged 20% in November compared to the same month a year ago. This marks the second successive month of year-on-year (YoY) decline.

As far as the Indian automobile industry is concerned, things are looking pretty grim as well, especially in the short term. SIAM (Society of Indian Automobile Manufacturers) estimates that total vehicle sales will fall 15% YoY in November. This is despite the slew of discounts that is being offered by companies to tide over the slowdown in demand. While the initial part of 2009 continue to spell troubled times for auto companies, we believe that the two factors that have hurt them over the past few months - higher interest rates and raw material prices - have more or less peaked.

In fact, price of key raw materials like steel, aluminium and plastics have corrected massively and hence, should benefit car companies on the profitability front. Furthermore, as inflation eases, interest rates are also likely to come down, making cars more affordable and reigniting the enormous latent demand.

Satyam's mess has its first casualty
The mess that Satyam has created for itself has had its first casualty. An independent director on the company's board, Ms. Mangalam Srinivasan, has resigned while taking moral responsibility for voting in favour of the controversial acquisitions of Maytas Infra and Maytas Properties.

Ms. Srinivasan has been a long time (for 17 years) director on the company's board. The resignation letter, a copy of which was made available to a leading business daily, reads - "I am sending this letter to let you know that while I raised many of the issues related to the procedures and had expressed my reservation during the Satyam board deliberations, I had not cast a dissenting vote against the acquisition of Maytas, for which I take the moral responsibility."

Satyam's independent directors have already taken a lot of flak for their approval to the conflict-ridden announcement. Ms. Srinivasan's resignation can now increase pressure on other independent directors to quit. Notable among them are Harvard Business School professor Krishna Palepu and Vinod Dham, the brain behind Intel's Pentium chip. Satyam's board is meeting on 29th December to consider a share buyback.