After being amongst the top underperformers of last week, the Indian markets did quite the opposite this week. Although not recording strong gains, the markets did well to end the week on a flat note, especially when compared to the European and American markets. India's benchmark index, the BSE-Sensex ended the week higher by a marginal 0.1%. During the early part of the week, the market witnessed some selling pressure over anxiety over the RBI's next move. Uncertainty over the central bank's monetary review policy is likely to be the reason for the same. However, as the week progressed, results of some index heavyweights (announced during the week) helped prop up the markets during the latter half.
Coming to global markets, Asian market did well with Japan and China being the top gainers. While Japan recorded gains of about 2%, China ended higher by about 1%. The US market ended the week on a flat note as well (down by about 0.1%). The top losers this week were Germany and France, which ended lower by about 3% and 2% respectively.
Source: Yahoo Finance
Coming to the performance of BSE indices this week – Concerns over the appreciating rupee led the BSE-IT Index to be the top loser last week (down by about 4%). However, this week, the index ended higher by about 9%. This was clearly on the back of better than expected results announced by the IT majors this week (discussed below). Amongst other key gainers were stocks forming part of the PSU and auto sector. The BSE-Auto Index was also amongst the top loser last week. Smallcap and midcap stocks were in favour this week as the BSE-Smallcap and the BSE-Midcap indices ended higher by about 3% and 2% respectively.
Amongst the key losers were stocks from the banking, FMCG and metal spaces. While the BSE-Bankex and the BSE-FMCG indices ended lower by about 2% each, the BSE-Metal Index ended lower by about 1%.
Moving on to the key corporate developments of the week, a number of large companies
announced their results during the week. IT major, Infosys registered a revenue growth of 3% QoQ during the quarter ending December 2009. This was largely on the back of a 6% increase in volumes and strong deal flow particularly from the US and banking and financial services vertical. However, industries like manufacturing and telecom continued to remain muted. Infosys' operating margins expanded by around 1% despite of weaker dollar and an increase in employee costs and sales & marketing expenses. PAT for the quarter grew by about 3% QoQ. It may be noted that the company outperformed its own revenue and EPS growth target for this quarter by a decent margin of 5% and 18% respectively.
TCS was the other major IT major that announced its results this week. It recorded a net sales growth of about 3% QoQ during 3QFY10. As for its 9mFY10 performance, revenues for this period grew by 8% YoY. Growth primarily led by manufacturing and telecom sectors. Operating margins during the quarter expanded by about 1.2% QoQ, largely on the back of better utilization and cost containment. At the profitability level, the company recorded a 11% QoQ growth this quarter. Profits during the 9mFY10 period grew by a strong 27% YoY. During the quarter ending December 2009, TCS assed 41 new clients and about 8,700 employees (net).
Sintex was another company that announced its 3QFY10 results this week. The company managed to grow its net sales by 3% YoY during the quarter. Its plastics division led this increase in revenues, recording a growth 5% YoY. However, sales for the company's textile division fell by 6% YoY. Sintex managed to improve its operating margins to 18.1% during the quarter, led by lower other expenditure. However, raw material costs rose on the back of higher commodity prices. Despite the 17% YoY growth in operating profits, Sintex's net profits grew by a marginal 2% YoY, dented by higher depreciation costs. The company's management believes that it is seeing some strong signs of a pickup in economic activity that is leading to higher capacity utilization for the company.
Two-wheeler major Bajaj Auto also announced its December 2009 quarter results. The company's topline grew by 57% YoY, while its bottom line grew by about 190% YoY. While the growth in revenues was largely because of a 64% YoY increase in volumes, profit growth was on the back of a strong operating performance. The company's operating margins during the quarter stood at 22% as against 14.5% during same quarter last year. While the quarter witnessed an increase in cost of raw materials and components on a sequential basis, greater economies of scale and effective cost management enabled Bajaj Auto to maintain margins. It may be noted that the industry growth rate stands at about 32%. With Bajaj auto growing at a relatively much faster pace, it has been able to increase its market share to 27% from 22% in 3QFY09.
Moving on to other corporate developments during the week, Bharti Airtel announced this week that it will be buying a 70% stake in Warid Telecom, which is the fourth largest telecom company in Bangladesh. It has a subscriber base of 2.9 m. As reported, Bharti will be making an investment of Rs 13.7 bn in the company for the stake. This capital infusion is will be used for funding network expansion and introduction of innovative products and services. This acquisition is a part of Bharti's strategy of expanding its international operations.
For the same, the company also announced during the week that it has set up a new unit, which will be focusing on the international markets. For the same, Bharti Airtel has planned to move its current CEO Mr. Manoj Kohli to its newly created international division to spearhead its global play. This move clearly signals the company's focus on the international markets and an indication of the company's business outlook. Mr. Sanjay Kapoor who is currently the deputy CEO of the company will replace Mr. Kohli. This move will be effective from 1st April 2010.
Concerns of the rising inflation continue to loom over India. A leading business daily during the week reported that India's wholesale inflation rose by 7.3% in December (4.78% in November). While food inflation eased to 17.28% after reaching nearly 20% last month, prices of non-food items such as textiles, paper products, metals and machinery witnessed a rise. This will certainly put added pressure on the RBI to undertake measures to curb inflation. Already the central bank is in a dilemma because raising interest rates could curb growth at a time when India's economy is limping back to normalcy.
Exports numbers for the month of December were reported during the week. In fact, they rose for the second straight month with exports worth US$ 15 bn in December 2009. This translates as a 9.4% growth over November 2009. Some of this is due to the various stimulus packages announced by the government. Interestingly, that is not sufficient to wipe up the losses stacked up during the previous 13 months. Little wonder then, the government plans to unveil a package of incentives for exporters in sectors that continue to face pressure. It is also unlikely to withdraw the stimulus package. However, all said and done, these figures will definitely bring a cheer to the export oriented industries.