After having dipped into the red following the announcement of poor IIP numbers for November 2010, Indian indices rebounded sharply following strong buying interest in heavyweights. Currently, stocks in the consumer durables and IT space are trading strong, while stocks from the capital goods and healthcare space are witnessing selling pressure.
Currently, the BSE-Sensex is trading up by around 151 points, while the NSE-Nifty is up by about 52 points. Buying interest amongst the mid and small cap stocks has remained relatively subdued with the BSE Midcap and BSE Small cap indices trading higher by only 0.38% and 0.18% respectively. The rupee is trading at 45.18 to the US dollar.
The IIP (Index of Industrial Production) numbers for November have been declared. Industrial growth slowed down to 2.7% in November 2010 against 11.3% during the same period last year. The poor performance could be attributed to dismal performance of the manufacturing sector which stood at a bleak 2.3%. The sector was pulled down by a decline in production of consumer non-durables by 6%. However, capital goods sector posted a growth of 12.6% YoY.
In October 2010, the industrial production had grown by 11.29% YoY. With IIP slowing down considerably in November, the RBI may be in a dilemma on whether or not to raise its policy rates to fight high inflation at the upcoming review on January 25.
Auto stocks are currently trading mixed with Tata Motors, Escorts and M&M trading firm, while Bajaj Auto, Maruti Suzuki and Ashok Leyland are trading weak. A leading business daily has reported that passenger vehicle major Maruti Suzuki is aiming to sell over 1.2 m vehicles this fiscal. In the year till date, i.e. April 2010 till December 2010, the company had sold 585,500 vehicles in the domestic market. This figure is higher by about 27% YoY. During FY10, the company sold a total of over 1 m vehicles, with domestic market contributing to nearly 86% of total volumes. At the end of the last fiscal, the company had the capacity to produce about 950,000 vehicles. The company has however, been able to increase the capacity by various methods including debottlenecking, increasing productivity, amongst others. After the same happening, the company is now able to produce about 100,000 vehicles a month. The company's manufacturing capacity will increase further when its second unit at Manesar commences production next fiscal. This optimism by the management may have also been prompted by the company’s car volumes sales for the month of December 2010. During the month, the company sold over 75,600 vehicles in the domestic market, which is higher by 21% YoY.