After staying glued to the break even line for most part of the day, the indices broke fresh grounds during the closing hours of trade. As a consequence, they have closed the day comfortably in the positive. The BSE Sensex edged higher by around 150 points (up 0.8%), Nifty closed with gains of around 50 points. BSE Midcap and small cap indices however closed mixed today with the former gaining marginally and the latter closing marginally lower. Two stocks gained for every one that closed lower on the Sensex today.
While the market movement for most part of the day was understandable, what did really come as a surprise was the last hour buying. With markets looking stretched from a valuation perspective and with factors like inflation and interest rates not quite looking to work in India’s favour, a lacklustre trade did look like a strong possibility. However, the last minute buying did come as a positive surprise. We believe that not much should be read out of it though. After the strong run up that we have seen in the 20 months or so, it does look like the markets could well have sideways movement for some time to come. A possibility of a correction cannot be denied either should global scenario take a turn for the worse.
Tata Motors, domestic CV major, closed marginally higher today. Close on the heels of posting an impressive quarterly result, the group as a whole has now gone ahead and registered robust sales numbers for the month of October. As per the company reports, the global sales of the group, comprising of Tata, Tata Daewoo and Jaguar and Land Rover (JLR), have grown 18% YoY in the month of October. Cumulative sales for the fiscal are higher by a strong 44% over the same period last year. Coming back to growth for the month, while CVs grew by 20% YoY, passenger vehicles registered a growth of 17% YoY. JLR continued to impress, notching up combined sales growth of 12% YoY. While this is indeed a good start to the December quarter, we believe hardening prices of raw materials does pose a threat to the profitability.
FMCG major Dabur closed firm today on the back of reports that the company is close to sewing up a buyout in the US. As per a leading daily, the company is in advanced negotiations with a US based firm and is likely to close the deal shortly. The company though has refused to comment. It should be noted that Indian FMCG companies, including Dabur, have been on a buying spree as they seek to diversify their revenue base and fight intense competition at home. The fact that most of these companies come equipped with strong balance sheet also seems to be helping matters. Where they will have to be careful though is on valuations. Overpaying for foreign assets could undo years of strong growth prospects.