Monday, March 2, 2009

All Fall Down

Closing Bell - Black Monday for Indian Equity Market

Taking cues from their Asian peers, the Indian markets began the week on a negative note. The indices failed to gather momentum throughout the day on the back of persistent selling activity. In fact, the markets sank further towards the fag end. The Sensex closed lower by around 280 points, while the Nifty closed lower by around 90 points. Stocks from the mid-cap and small-cap indices ended the day on a weak note as well. Selling activity was witnessed in stocks across sectors with the banking and metals space leading the pack of losers. Rupee closed at 51.78 against the US dollar. The Asian markets ended on a weak note today. The European indices are currently trading weak as well.

Retail stocks ended the day on a weak note led by Pantaloon and Trent. As per a leading business daily, Shopper’s Stop plans to exit some of its loss-making stores. This will allow the company to conserve cash in the ongoing economic downturn. The company is shutting down three of its book stores ‘Crossword’ (one in Mumbai and two in Chennai). It has also closed down its airport retail store ‘Stop & Go’ at the Mumbai Airport. The company had earlier pulled out of catalogue retailing with UK’s Home Retail group under the Hypercity-Argos brand. It has also moved out of food business wherein its Café Brio outlets would be replaced with Café Coffee Day outlets over the next couple of months. It may be noted that Shopper’s Stop, like other retailers, had outlined ambitious expansion plans and kept adding space. This has put a lot of pressure on their bottomlines. Moreover, the economic slowdown has impacted their toplines. However, Shopper’s Stop expects rationalisation to take place in the near to medium term.

Bajaj Auto announced its unit sales for the month of February 2009. The company reported a 17% YoY fall in two-wheeler sales. On the other hand, its exports dropped by 19.7% YoY as compared to a year ago. Total vehicle sales (including three-wheelers) for the month stood lower by 16.3% YoY. The company’s management expects exports to remain subdued in the next quarter as well. It also expects three-wheeler sales to remain low on account of the overall slowdown in the commercial vehicle industry. The stock of Bajaj Auto led the pack of losers in the auto sector as it is the only company to record a decline in volumes when compared to its peer group, TVS and Hero Honda.

India’s export numbers for the month of January 2009 have declined by 15.9% YoY, thus marking a drop in exports for the fourth consecutive month. The import figures have dropped as well. It may be noted that imports have dropped for the first time this fiscal. The monthly trade deficit stood at US$ 6.1 bn. However, for the April to January period, the country's cumulative exports grew by 13.2% YoY. This is in sharp contrast to the growth of 30.9% YoY during the first half of the fiscal. On the other hand imports for the period between April and January went up by 25.3% YoY.

Raymond to focus on West Asia

The markets continued to languish in the red during the previous two hours of trade on account of sustained selling activity. Barring select auto stocks, almost all stocks are trading lower on the Nifty. The overall decline to advance ratio is poised at 2.5 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading lower, down by almost 260 points and 80 points respectively. The BSE Midcap and Smallcap indices are also trading lower by 1.5% and 1.2% respectively. The rupee is trading at 51.80 to the dollar.

Engineering stocks are trading mixed. While L&T and BHEL are trading lower, Alstom Projects is trading higher. As per a leading business daily, the government is likely open bids to the tune of Rs 210 bn for a bulk order of supercritical power equipment. The order involves supplying the main plant equipment such as boiler-turbine-generator to nine power units of NTPC and two units of the Damodar Valley Corporation. It may be noted that companies with domestic manufacturing facilities will only be allowed to bid for the supply of these equipments. The remaining equipments like coal handling and ash handling plants worth around Rs 150 bn are also expected to be ordered separately. This is a positive development for domestic supercritical equipment manufacturers like L&T, BHEL and Bharat Forge, who are likely to participate in the bid.

Textile stocks are trading lower led by Arvind and Raymond. As per a leading business daily, Raymond plans to double its network of stores in West Asia to 50 stores by 2012. According to the company, this is likely to increase Raymond’s share from West Asia to 45% of its total international revenue. The company also plans to increase its textile sales in this region by 50% to around 1.5 m meters during this period. It may be noted that the company has around 35 stores in international markets, of which 24 stores are present in West Asia. The new stores would further strengthen Raymond’s presence in the growing retail market in the region, which is projected to be around US$ 500 bn by 2010.

Sales cheer for auto stocks

The Indian markets continued to trade in the negative during the previous two hours of trade on account of intense selling pressure among the index heavyweights. Stocks from the banking, software and metals sectors are leading the pack of losers, while the auto stocks are trading firm. The overall market breadth is negative with losers outnumbering gainers by a ratio of almost 1.8 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading lower, down by around 210 points and 65 points respectively. The BSE Midcap and Smallcap indices are also trading lower, down by 0.8% each. The rupee is trading at 51.72 to the dollar.

Auto stocks are trading firm led by Maruti Suzuki and Tata Motors. Maruti Suzuki reported a volume growth of 24% during February 2009 on a year on year basis. This is largely led by a threefold increase in sales of A3 segment car that accounted for 10% of the company’s total sales volume during February. The company’s recently launched model (A-star) also aided the growth during the month. While the domestic sales (contributing 89% to total sales) grew by 19% YoY, the exports recorded a growth of 90% YoY during the same period under consideration.

Software stocks are trading weak led by TCS and Infosys. As per a leading business daily, Infosys is planning to restructure its Australian operations. The company is downsizing around 5% of workforce at its Australian subsidiary. The subsidiary currently has 360 employees. The revenues and profits from this region have been shrinking during the last couple of quarters on account of global slowdown and unfavourable currency movements. During 3QFY09, Australian subsidiary’s revenues fell by 16% QoQ contributing 2% to Infosys' total revenue, while its profit fell by 42% QoQ.