After being the sole loser amongst the key indices during the previous week, Indian markets ended this week on a firm note. In fact, the Indian markets seemed to be a in a festive mood this week as its benchmark index, the BSE-Sensex emerged as the top gainer amongst Asian markets. The index ended the week higher by about 4.1%. The global markets seemed to have joined in with the celebrations as well as they all ended the week on a firm note. The Brazilian markets shared the pole position with India this week (closing price as of 15th October). Other Asian markets viz. Japan and China followed suit as they ended higher by 2.4% and 2.2% respectively. The US and UK markets were however amongst the lowest gainers this week, recording gains of about 2% and 1.1% respectively.
It may be noted that we have taken the closing prices of the American and European markets as of 15th October.
|Source: Yahoo Finance
Coming to the performance of sectoral indices in India, banking and metal stocks took the cake this week as the BSE-Bankex and BSE-Metal indices ended higher by about 8% each. Buying activity was also witnessed in stocks from the realty space as the BSE-Realty Index ended higher by nearly 7% over the previous week.
Midsized stocks seemed to be preferred choice of the market participants this week as the BSE-Midcap Index ended higher by 5%. In comparison, the BSE-Sensex and the BSE-Smallcap indices ended higher by about 4% each. Amongst the lowest gainers was the BSE-FMCG Index (which was the top gainer last week), ending the week higher by 1%. Stocks from the IT and healthcare sectors ended higher by about 2% each.
Moving on to corporate news - A number of companies announced their results during the week. Housing finance major, HDFC reported an interest income growth of 14% YoY during 1HFY10. This was on the back of a 10% YoY growth in advances. However, its net interest margin (NIM) dropped by 0.2% YoY to 3.6% during 1HFY10 as against 1HFY09. Further, HDFC reported a 270% YoY increase in its other income during the first half of FY10. This was mainly on the back of higher cash surpluses and profit on sale of certain investments. Its net profit grew by 23% YoY during 1HFY10 due to lower provisioning and controlled operating expenses. At the end of the quarter, the capital adequacy and net NPAs stood at 14.9% and 1% respectively.
HDFC Bank was another firm which announced its results during the week. The bank reported a 15% yoY growth in advances during 1HFY10. This indirectly gives indications of the slowdown in the growth of the asset books for the Indian banking sector as a whole. However, on the other hand the bank recorded a marginal increase (0.1% YoY) in NIMs during the first half of FY10, which stood at 4.2%. In addition, cost efficiency, which was one of the bank's main concerns after the acquisition of Centurion Bank of Punjab, seems to have been worked upon as the bank was able to reduce the cost to income ratio from 55% 1HFY09 to 50% in 1HFY10. Further, the bank's asset quality also continued to remain healthy with net NPAs at 0.5% of advances as against 0.6% in 1QFY10.
Cement major Ultratech announced its results today. The company reported a 21% YoY growth in revenues during 1HFY10. During the quarter ended September 2009, revenues were higher by 10% YoY. Operating margins have shown a significant improvement as they stood at 34.6% during the 1HFY10 as against 26.5% during the corresponding period in the previous year. This was largely due to the effect of softening fuel prices, along with containment of overall costs. Also the fact that the company reported higher volumes helped in the margin expansion. At the profit before tax (PBT) level, the company reported a 69% YoY growth. However, on the back of a 106% YoY increase in tax costs, the net profit growth for the period 1HFY10 stood at 56% YoY.
Coming to news of the auto sector - with the sales numbers for auto companies being released, the overall scenario has taken a turn for the better. During the month of September 2009, sales of commercial vehicles (CVs) grew by nearly 6% YoY. This indirectly gives signs of the recovery in the Indian economy to remain sustained. Growth was not restricted to just CVs but witnessed in cars and two-wheelers as well. Sales of cars grew by 20% YoY during the month. Key reasons behind the same were the festive season leading to higher spending, easy availability of loans and low interest rates. These factors helped in boosting demand. In addition, launches of new vehicles also remained a reason for the rise in sales. Coming to two-wheelers, the growth for this segment stood at a tepid 7.6%. However, if we look at the longer during i.e. for the first six months of the year sales of two-wheelers have grown by 15%, while car sales have grown by 14% YoY. On an overall basis, concerns remain with respect to the impact of weak monsoons and whether demand will hold up after the festive season. However, since auto sales are a good indicator of where the economy is headed, these strong numbers do give us something to cheer about.
Recently, India's leading economic think tank, CMIE (Centre for Monitoring Indian Economy) released its projections for Indian companies' financial performance for the current fiscal (FY10). It expects India Inc.'s net profit growth to be around 22.8% during the year. This is expected to be on the back of a meager 4.1% YoY growth in sales. Incidentally, the 40 companies (from our database universe) that have announced their 2QFY10 results so far, have grown their sales and net profits at nearly these rates of 4.6% and 22.5% respectively.
Moving on to economy-related news, the IIP (Index of Industrial Production) numbers for the month of August 2009 were announced this week. This important measure of the Indian economy pointed towards a recovery with a 10.4% YoY growth. This compares to a measly 1.7% YoY growth in August 2008. It may also be noted that July's industrial growth rate was revised upwards to 7.2% from previously reported 6.8%.
It may be noted that the growth in the index of industrial production (IIP) during the month of August was way better than expected. In fact, it far exceeded the 7% projection done by the Institute of Economic Growth (IEG). With the announcement of such a strong growth rate, hopes of India being able to surpass the anticipated GDP growth rate of 6% are now being raised. Readers must remember that this figure was a number that had started to look insurmountable till only a few weeks back in view of the shortfall in agricultural production. But after heavy rains in some part of the country and now, the strong IIP numbers, the expected GDP growth looks well within the realms of possibility.