Monday, March 9, 2009

Closing Bell 09-09-09

FMCG, realty lead the fall
The indices managed to curb a part of their losses during the final hour of trade as some buying was seen at lower levels. However, they ended well below the dotted line. The Sensex closed lower by around 170 points, while the Nifty closed lower by around 45 points. Stocks from the mid-cap and small-cap indices ended the day on a weak note as well. While selling activity was witnessed in stocks across sectors, stocks from the real estate and FMCG led the pack of losers. Most other Asian markets closed on a weak note. The European indices are currently trading weak as well. Rupee was trading at 51.86 against the US dollar at the time of writing.

Pharma stocks ended the day on a mixed note with Piramal Healthcare ending firm and Ranbaxy ending weak. As per a leading business daily, Ranbaxy has received the final approval from US FDA (Food and Drugs Administration) to sell ‘Ramipril’ capsules in a 5 mg and 10 mg dose. The drug is used to treat cardiovascular disease for patients, usually of the age of 55 years and above. This is a positive set of news for the company considering the tiff it has been having with the US FDA for manufacturing deficiencies from its Paonta Sahib facility in Himachal Pradesh. It may be noted that this is the third marketing approval which the company has received through Ohm Laboratories in the last two months.

Steel stocks ended the day on a weak note led by Tata Steel and SAIL. Tata Steel recently disclosed its sales volume for the month of February this year. The company reported a volume growth of 47% YoY to 584,000 tonnes during the month. While the production of hot metal, crude steel and saleable steel grew by 19% YoY, 12% YoY and 21% YoY respectively, volumes for long and flat products grew by 65% YoY and 37% YoY respectively. The higher sales growth during the month is mainly attributed to increased demand from sectors like construction and automobile.

The World Bank has projected that the world economy is likely to decline this year. It may be noted that if this does happen, it will be for the first time since World War II. In addition, the bank believes that this decline will have an adverse impact on developing nations. The bank’s rationale behind the same is on account of the developing nations facing financial shortages to the tune of US$ 270 bn to US$ 700 bn this year. In addition, the bank reported that 94 out of 116 developing countries have experienced a slowdown in economic growth. Of these countries, 43 have high levels of poverty.

Auto major, Ford Motors is looking to outperform the overall growth in China's car market this year. It aims at doing so by launching new vehicles to attract buyers in China. This includes small cars as well. It may be noted that China overtook the US to become the world’s largest car market in January this year.

TCS pulls up its socks, stock down

The Indian markets continued their southward journey on account of sustained selling activity witnessed during the previous two hours of trade. Stocks from the construction, aluminium and FMCG sectors are leading the pack of losers, while select stocks from the energy, auto and engineering sectors are trading higher. The overall decline to advance ratio is poised at 2 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are trading lower, down by almost 200 points and 60 points respectively. The BSE Midcap and Smallcap indices are trading lower by 1.3% each. The rupee is trading at 51.74 to the dollar.

Software stocks are trading mixed. While, Satyam and Tech Mahindra are trading higher, TCS and Infosys are trading lower. As per a leading business daily, TCS plans to layoff around 1,300 employees which form around 1% of its total global workforce. Around 100 employees have already been laid off from the Chennai unit of the company in the last two weeks. It may be noted that recently the management of the company had planned to review the variable pays of its employees in order to counter the economic crisis. The company also increased the number of working hours from 40 hours per week to 45 hours per week, which is scheduled to be implemented from April 2009 onwards. Employee costs stood at 36% (as a percent of sales) during 9mCY09. Amidst ongoing financial crisis and economic slowdown TCS has made this move to contain its cost and enhance productivity.

Automobile stocks are trading mixed. While Tata Motors and Maruti are trading lower, Ashok Leyland is trading higher. Society of Indian Automobiles Manufacturers (SIAM) has announced the auto sales number for the month of February 2009. Cars sales grew by around 22% YoY during February 2009 on the back of government stimulus packages to boost the consumer spending. The total volume sales stood at around 115,386 units in February 2009 as against 94,757 units in the corresponding period previous year. However, sales of trucks and buses declined by 32% to 31,069 units during the same period as their sales are directly linked to the economic growth. It may be noted that domestic car sales had been declining continuously between the period October 2008 and January 2009. With excise duty cuts and lower interest rates, higher demand is expected going forward.