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Global markets, capital goods & more...

Apr 2, 2008

  • Asian markets have opened today with a real bang, with strong gains seen in benchmark indices of Hong Kong, Japan, Singapore and Taiwan. As reported by Reuters, these gains are seen as a reaction to the successful sale of securities by investment banks, UBS and Lehman Brothers, which might signal an end to the eight months of turmoil in the global financial markets. Following this news, while the US Dow Jones Industrial Average closed 3% up, the technology laden NASDAQ also ended with similar gains. Further on the back of positive sentiments, crude oil was pushed down towards the US$ 100 per barrel mark. Gold prices also plummeted below the US$ 900 an ounce level on hopes that the US economy might emerge stronger from a credit crisis, which otherwise seemed to be deteriorating.

    As far as Indian stockmarkets are concerned, caution remains the buzzword as concerns have been raised with respect to surging inflation, downward revision of corporate India's near-term earnings, and the overall impact of a slowing domestic economy. The impending March quarter result season is also keeping participants on the tenterhooks.

  • The latest completed fiscal year, FY08, was yet another year of strong growth momentum for Indian capital goods companies. Robust order intakes, execution of the already bulging order books and aggressive moves in the international markets were some of the characteristic features of the growth recorded by companies in the sector during the fiscal. The BSE-Capital Goods Index drew confidence from the same and ended the year with gains of 54% YoY, against Sensex gains of just under 20% YoY. Leading the gain in the capital goods index were stocks like Voltas, Punj Lloyd, L&T, ABB and BHEL. Others like Siemens, Cummins, Suzlon and Crompton Greaves also recorded yearly gains though lower than the broader capital goods index.

    For the current fiscal, FY09, while increased order flows from power , oil and gas and construction sectors shall add to order books of most of these companies, increased investments in the Middle-East shall continue to spur growth for some of them. However, these companies have to contend with rising costs of raw material costs, which might impact profitability. Also, any slowdown in economic growth, as was seen in the latest quarter, could be dampener to demand. Another key factor that shall keep the managements occupied is to do with attracting and retaining the right kind of people.

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