After opening in the negative, the
Indian stock market indices failed to gain any momentum today. Index heavy weights were trading at lower levels for the major part of the day. While the BSE-Sensex closed 142 points lower (a 0.8% decline), the NSE-Nifty closed lower by 37 points (down 0.7%). The BSE Midcap and the BSE Small cap
indices, however had a better outing. They saw significantly lower losses compared to the large caps. They managed to see losses of only 0.1% and 0.3% respectively. Regarding the sectoral indices, realty stocks managed to see some gains. However most of the other indices were trading in negative territory. Metal and banking stocks fared the worst.
As regards major global stock markets, all Asian indices were trading in the negative zone. China and Japan saw a bulk of the losses. Slower export numbers coming from China and Germany were of concern. Spain also saw a further debt downgrade. Most European indices were thus also trading in the red. The rupee was trading at Rs 45.13 to the dollar at the time of writing.
On the back of increased demand from North America, Asia and Africa Indian exports saw an almost 50% YoY increase in February 2011 to US$ 23.6 bn. The country's export target for the year was also crossed with a month to spare. During April-February 2011, India's merchandise shipments grew by 31.4% to US$ 208.2 bn, crossing the US$ 200 bn target for FY11. Sectors that performed well include gems and jewellery, engineering, ready-made garments, cotton yarn, electronics, etc.
Imports also saw an increase in February 2011, with a 21.2% growth to US$ 31.7 bn. This left a trade deficit of US$ 8.1 bn. During 11-month period from April-February, 2011, imports grew by 18% to US$ 305.3 bn. The trade-deficit for the period amounted to US$ 97.1 bn. Sectors seeing the maximum imports included petroleum and oil lubricants, gems and silver, vegetable oil, etc.
Tata Steel was one of the biggest losers on the 30-share Sensex today. We believe one of the major reasons for the same could be that it announced that its raw material expenses are likely to go up by around US$ 1 bn in the current fiscal to US$ 7 bn due to increased input costs.
According to the company, input costs would further increase by around 15% in FY11, due to higher iron ore and coking coal prices. Floods in Australia and demand from China also exacerbated the problem. Steel prices are set to go up next fiscal, as manufactures do not intend to absorb these cost pressures. The Group is looking to acquire greenfield coal and iron ore assets in the future. This will probably help the company control costs, however for the time being there may be some pressure.
The latest budget may actually take the very shirts off our backs. One of India's top retail giants Pantaloon Retail, part of the Future Group of companies has hiked prices of its branded clothing by 18%. This hike will be applicable for new stocks that will come into stores from March 2011. However, this hike is not inclusive of the 10% excise hike imposed in the budget on branded apparel. This will be an additional burden that will be passed onto the customers and this may have an effect on demand and volume growth.