Wednesday, February 18, 2009

Todays Market 18th Feb 09

After opening the day on a volatile note, the markets slipped into the red during the morning session. However, the indices staged a comeback towards the second half of the day’s trade, breaching the dotted line only to slip back towards the fag end. The Sensex closed lower by around 20 points, while the Nifty closed higher by around 5 points. Stocks from the mid-cap and small-cap indices ended the day in the red. While stocks from the realty and energy sectors led the pack of gainers, stocks from the banking and software sectors closed the day on a weak note. Rupee closed at 49.97 against the US dollar. While the Asian markets ended on a mixed note today, the European indices are currently trading weak.

Auto stocks ended the day on a positive note led by Bajaj Auto, Tata Motors and Maruti Suzuki. As per a leading business daily, the management of auto major, Maruti Suzuki, is expecting its February sales to grow by at least 5% to 7% YoY. This expectation comes on account of the company recording its highest ever monthly sales in the month of January 2009. The management added that the company has increased production at its facilities in order to meet the demand. It may be noted that the company has passed on the benefits of excise cuts to the customers by lowering the prices of its vehicles.

Software stocks ended the day on a weak note led by NIIT, Wipro and TCS. As per a leading business daily, Infosys is expecting a 5% cut in IT budgets from its European clients this year. The company surveys its top 100 clients every year in order to get clarity from them. As a result the company expects a revenue loss during the year 2009 as its European clients contribute nearly 26% of the company’s total revenues (3QFY09). It may be noted that company has been reviewing its realisations downwards so that it can witness a steady growth in its revenues in the face of lower demand from its clients.

As per a leading business daily, India is likely to export wheat for the first time in six year. This is due to the robust stock build up on account of bumper harvests. It is expected that India will harvest 76.5 m tonnes (MT) of wheat this year and export nearly 1 MT. It may be noted that the country last exported wheat in FY04 and imported the same 2006 and 2007.

R&D blow for big autos

The Indian markets remained volatile on account of alternate bouts of buying and selling activity witnessed during the previous two hours of trade. Stocks from the construction, telecom and metals sectors are leading the pack of gainers, while select stocks from the banking, auto and power sectors are trading lower. The decline to advance ratio is poised at 1.3 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are higher, up by around 25 points and 20 points respectively. The BSE Midcap and Smallcap indices are also trading firm, up by around 0.1% and 0.2% respectively. The rupee is trading at 49.76 to the dollar.

Auto stocks are trading mixed. Tata Motors and Maruti are trading higher, while M&M is trading lower. As per a leading business daily, government would fund only 50% of expenditure incurred for research & development (R&D) by major automobile companies as against the earlier 100% funding. However, small auto firms would continue to avail 100% funding for its R&D expenditure. The government believes that the small companies do not have sufficient resources and thus would get full financial support, while bigger companies like Maruti, Hyundai and Tata Motors do not lack resources and thus would get less funding. However, the fact is that the bigger automobile companies are facing liquidity problems due to the current economic crisis and this move by government would further hurt the auto majors.

Energy stocks are trading mixed. Reliance Industries and GAIL are trading higher, while Essar Oil is trading lower. As per a leading business daily, the government is likely to announce a tax holiday for the producers of natural gas. A decision on the proposal to include natural gas in the definition of mineral oil is likely to be taken up by the Cabinet. It may be noted that the uncertainty over tax holidays for natural gas producers began after the Finance Bill 2008-09 proposed to redefine mineral oil in the section 80-IB(9) which does not include natural gas. However, the petroleum ministry wants mineral oil to be defined as hydrocarbon, which can be either crude oil or natural gas or both. This is a positive development for natural gas producers like RIL and ONGC. It will also encourage further investments into the sector.