Friday, March 6, 2009

Closing Bell 06-03-09

Led by strength in IT and energy stocks, the Indian markets surged strongly in today’s trades. While the BSE-Sensex closed with gains of around 130 points, the NSE-Nifty closed higher by 40 points. Mid and small-cap stocks however remained out of limelight, as they ended the day on a weak note.

Most other Asian markets closed on a weak note. The European indices are currently trading mixed. Rupee was trading at 51.66 against the US dollar at the time of writing.

Banking stocks ended the day on a mixed note with PNB and Dena Bank leading the pack of gainers. Indian Bank and Oriental Bank, on the other hand, led the losers’ pack. Gains in PNB were seemingly triggered by news reports that the bank has tied up with Tata Motors to provide financing facilities for the latter’s entire range of passenger vehicles. Considering that Tata Motors has a number of car launches lined up in the current year (including the Nano), it will provide a good opportunity for the bank to expand its auto financing business.

Software stocks ended the day on a firm note led by Satyam, Patni Computers, Mphasis and TCS. Amidst the ongoing economic slowdown, the depreciating rupee has lent some strength to IT companies. This is for the fact that these companies can now convert every dollar of revenue into greater number of rupees. However, it may be noted that the depreciation of the rupee against the dollar will not help much as long as macro issues keep haunting them. Growing pricing pressure and slowing deal flows from the US and Europe is affecting the IT industry negatively.

As per a leading business daily, infrastructure growth for six industries in the month of January stood at 1.4% YoY. These six industries include crude oil, petroleum refinery products, coal, electricity, cement and finished carbon steel. The reason behind the same has been on account of lower production levels in the sectors barring cement. During January 2008, these sectors had reported a growth of 3.6% YoY. However, during the 10-month period (April 2008 to January 2009) the growth stood at 3.2% YoY as against 5.7% YoY in the corresponding period in the previous year.

Markets remained volatile during the previous two hours of trade on account of alternate bouts of buying and selling activity. Currently stocks from the software, capital goods and energy sectors are leading the pack of gainers, while stocks from the FMCG and pharma space are at the receiving end. The overall decline to advance ratio is poised at 2 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading higher, up by almost 45 points and 15 points respectively. The BSE Midcap and Smallcap indices are trading lower, down by 1.4% each. The rupee is trading at 51.59 to the dollar.

Software stocks are trading mixed. While Infosys and TCS are trading higher, Satyam and HCL Infosys are trading lower. As per a leading business daily, Satyam has received approval from SEBI to facilitate a global competitive bidding process. The regulator has exempted Satyam from certain requirements of the takeover code. This will enable the company to select an investor to acquire a 51% interest in the company. Earlier, the Company Law Board had also authorised the government appointed board of directors to select an investor. This development will expedite the process of Satyam’s stake sale and will help the beleaguered company come out of the present mess.

Steel stocks are trading mixed. While Tata Steel and SAIL are trading higher, JSW Steel is trading lower. As per a leading business daily, domestic steel consumption grew by around 6% to 4.5 m tonnes in February 2009 on account of improved demand from the automobile and construction sectors. Domestic steel production grew by around 3% to 4.7 m tonnes during the same period. It may be noted that the steel imports surged by around 40%, while exports declined by 17% in February 2009 indicating a revival in domestic demand. However, total domestic steel consumption for the period between April 2008 and February 2009 declined by 1.3% as compared to corresponding period in the previous year.

Low occupancies hit hotels

The indices gained ground during the previous two trading hours on account of buying activity witnessed at lower levels. Stocks from the banking and engineering sectors are leading the pack of gainers, while select stocks from the FMCG and auto sectors are trading weak. The overall decline to advance ratio is poised at 1.7 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are trading firm, up by around 40 points and 10 points respectively. The BSE Midcap and Smallcap indices are trading weak, down by 1% each. The rupee is trading at 51.49 to the dollar.

Hotel stocks are trading mixed. While Indian Hotels is trading firm, EIH is trading weak. As per a leading business daily, hotel occupancies in the top ten cities in India have fallen by 21% YoY, while the average room rates have declined by about 14% YoY during the month of January this year. Some cities have reported de-growth in their room demand. Bangalore and Pune have reported occupancy rates of 49% and 43% respectively, while Mumbai’s occupancy stood at 54%. Traditionally, January forms a part of the peak season for the industry. It may be noted that on account of economic slowdown and terrorist attack, tourist arrival has declined in the country.

Auto stocks are trading mixed. While Maruti Suzuki and Tata Motors are trading weak, M&M is trading firm. As per a leading business daily, Maruti Suzuki may slash price of its best-selling model, Alto to counter against Tata Motors’ Nano. It may be noted that Nano carries the lowest price tag of Rs 100,000 and is expected to eat up the market share of its competitors including Maruti. Maruti will review on the market situation after the launch of Nano (launching on March 23) and respond accordingly. Hence as pre-emptive measures, the company may take some action to give cut-throat competition to the lowest car. The Alto is currently priced at Rs 230,000.

Taking cues from their global peers, the Indian markets started the day’s proceeding on a subdued note. While buying activity is being witnessed in stocks from the software and metals space, stocks from the banking, realty and FMCG sectors are trading weak. The overall decline to advance ratio is poised at 2.7 to 1 on the BSE. As regards to the global markets, both the US and European markets ended in the red yesterday. The Asian markets are currently trading weak.

The BSE Sensex and the NSE Nifty are trading lower, down by around 92 points and 15 points respectively. The BSE Midcap and Smallcap indices are trading firm, down by 1.5% each. The rupee is trading at 51.63 to the dollar.

Energy stocks are currently trading mixed. While ONGC, GAIL and BPCL are garnering investors’ interest, Gujarat Gas and Chennai Petro are at the receiving end. As per a leading business daily, ONGC board has approved an investment of about Rs 35 bn for putting in additional facilities at its oilfields in Assam and western offshore. The board of ONGC has approved an investment of Rs 24 bn for re-engineering and revamping the surface facilities at Lakwa and Lakhmani oilfields in Assam and an investment of nearly Rs 7 bn in development of PK and South West Panna areas in the Panna Mukta oilfield in western offshore. The company is planning to make these investments in oil and gas discoveries in order to boost output to meet the demand going forward.

Pharma stocks are currently trading weak led by Ranbaxy, Lupin and Dishman Pharma. As per a leading business daily, Pfizer and Sanofi Aventis are eyeing Wockhardt’s biotechnology business. Wockhardt is planning to hive off its biotech business and planning to use proceeds to pay off its debts. This would help the company reduce its debt equity ratio. At present Wockhardt has a debt-equity ratio of 2.3. It may be noted that Wockhardt raised US$ 100 m in 2004 through foreign currency convertible bonds (FCCBs). The funds were raised at a conversion price of Rs 486 per share. The company now needs US$ 110 m to repay these bonds which expire in September as foreign investors who bought its bonds may not convert them into equity at current market price.



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