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Six-month high on global cues - Views on News from Equitymaster
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  • Apr 4, 2009

    Six-month high on global cues

    The Indian markets continued their upward journey as the BSE-Sensex ended higher by nearly 3% over its last week's closing level. It ended the week at about 10,350 points, which is its highest level in about six months. The other Asian markets such as Hong Kong (up 3%), Japan (up 1.4%) and China (up 1.9%) ended on a positive note as well. It is believed that Asian stocks ended on a positive note on account of the G-20 leaders agreeing on substantial measures to fight the global recession.

    Other global markets ended the week on a firm note as well. Brazil and Germany led the pack of gainers by recording gains of nearly 5.9% and 4.3% respectively. They were followed by the France, UK and US, which ended higher by 4.2%, 3.4% and 3.1% respectively.

    Coming to the performance of sectoral indices in India, stocks forming part of the energy and banking sectors emerged as the top gainers during the week. The BSE-Oil & Gas and BSE-Bankex indices recorded gains of 20.5% and 18.9% respectively. On the other hand, the BSE-FMCG Index (up 5.4%) and the BSE-Smallcap Index (up 10.4%) remained the lowest gainers.

    Strong auto sales volumes for the month of March 2009 enthused investors this week. Tata Motors reported a 24% rise in sales on a month on month basis. On the other hand, Maruti Suzuki recorded a 22% YoY jump in vehicle sales, aided by higher exports of its compact A-Star model and strong rural demand. In the meanwhile, the company also declared its plans of discontinuing production of 'Maruti 800' model in phases. This is on account of the vehicle not being able to meet the new emission norms that are coming into play. As for the two-wheeler companies, while Bajaj Auto recorded a 15% YoY drop in volumes in its two-wheeler sales, Hero Honda and TVS Motors recorded sales that were higher by 10% YoY and 4% YoY respectively.

    Engineering and construction major, L&T is on a roll. The company bagged orders worth Rs 52 bn during the week itself! It bagged two orders worth Rs 13 bn from MRPL and another two from Tata Steel worth Rs 11 bn. It may be noted that at the end of December 2008, L&T had an order backlog of Rs 688 bn which is nearly 2.4 times its FY08 sales.

    During the week, a leading business daily reported that the top Indian software companies are competing for BSNL's Rs 60 bn (US$ 1.2 bn) outsourcing contract. Companies such as TCS, Infosys, Wipro, Tech Mahindra, Spanco Telesystems, HCL Infosystems and Satyam are all believed to be in the race for the contract. The contract has an estimated budget of Rs 15 bn for each zone (north, south, east and west). While a few have bid for all four regions, the others have bid for selected regions. It may be noted that ever since the global markets have been hit by the economic slowdown, the Indian IT firms have increased their focus on domestic markets significantly. Despite the global slump, Gartner believes that Indian companies' IT budgets are still expected to grow. It further believes that the revenues from the government projects in India are expected to go up dramatically over the next two years as the government's IT spends are estimated to touch levels US$ 4 bn.

    Source: Yahoo Finance Source: Yahoo Finance

    Source: SEBI Source: BSE

    Source: BSE Source: BSE

    Movers and shakers during the week
    Company 27-Mar-09 2-Apr-09 Change 52-wk High/Low Change from 52-wk High
    Top gainers during the week (BSE-A Group)
    Opto Circuit 85 112 33.0% 217 /70 -48.2%
    JSW Steel 231 304 31.8% 1,178 / 161 -74.2%
    Financial Tech 567 680 19.9% 1,895 / 404 -64.1%
    Essar Ship. 30 36 19.7% 182 / 19 -80.4%
    Punj Lloyd 90 107 18.5% 380 / 67 -71.8%
    Top losers during the week (BSE-A Group)
    Akruti City 778 634 -18.5% 2,012 / 550 -68.5%
    ICICI Bank 385 360 -6.5% 955 / 253 -62.3%
    Bajaj Holding Invst 317 300 -5.4% 765 / 210 -60.8%
    Hero Honda 1,086 1,029 -5.2% 1,075 / 630 -4.3%
    HUL 240 231 -3.8% 268 / 185 -13.8%
    Source: Equitymaster

    Inflation numbers as measured by the wholesale price index (WPI) were reported at 0.31% for the week ending March 21. This was higher than the previous week's number of 0.27%. The reason behind this increase is the higher prices of certain foods items such as tea, gur, aerated water and imported edible oil. In the corresponding period in the previous year, inflation stood at 7.8%.

    As per the provisional information issued by the Ministry of Commerce, exports during the month of February declined by 22% on a year on year basis. The imports were also lower by 23% YoY for the same period, thus narrowing the trade deficit by as much as 27%. It may be noted that major component of import bill is related to the requirement of the hydrocarbon energy. With RIL's KG basin gas expected to flow during the month and production of oil from Cairn's Rajasthan field to start within a month, India's import bill is expected to be significantly lower during the current fiscal.

    The Asian Development Bank recently released a report on the economic growth for Asia. The bank has cut Asia's growth forecast on account of slowdown in the global economy. As for India, it expects the economy to grow by 7.1% during FY09, while the growth for FY10 is projected at 5%.

    Meanwhile, the RBI's recent report on India's balance of payment condition also did not make for a good reading. The country's current account deficit, a measure of how much more it imports than it exports, has climbed to US$ 14.7 bn. Never since 1990 has India raked up such a huge number. Furthermore, this time around, even the capital inflows have not been able to offset the same. In fact, the net capital outflow of US$ 3.2 bn has meant that the twin deficits put together have depleted our forex reserves by a staggering US$ 17.8 bn.

    The optimism in global financial markets this week was largely on the back of hopes of further stimulus packages from the G-20 Summit. With the member countries having pledged a whopping US$ 1.1 trillion towards improving both, availability of capital as well as cross border trade, markets were not disappointed. Among other accomplishments of the summit was a unilateral agreement towards more stringent regulation of financial firms and doing away with protectionist policies. The summit also took note of the rising economic power of India and China, evident in the fact that the leaders agreed to restructure IMF management so as to give more representation to emerging nations.



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