Friday, March 13, 2009

Closing Bell 13-03-09

Markets soar on global cues Continuous buying activity led the indices to continue their upward journey during the final hour of trade. The Sensex closed higher by around 410 points, while the Nifty closed higher by around 100 points. Stocks from the mid-cap and small-cap indices ended the day on a positive note as well. Buying activity was witnessed in stocks across sectors with the realty, metal and banking space leading the pack of gainers. However, stocks from the healthcare and FMCG sectors remained less in favour. Most other Asian markets closed on a mixed note. The European indices are currently trading in the green. Rupee was trading at 51.62 against the US dollar at the time of writing. Auto stocks ended the day on a positive note led by Tata Motors, TVS Motors, M&M and Ashok Leyland. As per a leading business daily, Tata Motors has signed a pact with State Bank of Travancore and State Bank of Mysore for vehicle financing for its range of passenger cars. It may be noted that the company has tied up with various banks, especially PSUs, to provide similar services for its customers. These tie ups will not only help the company in selling its much anticipated small car ‘Nano’ but will also benefit due to the pan-India reach of the banks. Energy stocks ended the day on a firm note led by Reliance Industries, Chennai Petroleum and Petronet LNG. As per a leading business daily, Reliance Industries (RIL) will start producing gas from its KG basin by mid-April this year. The company has extended the deadline by a month from its earlier plan. Initially, RIL would produce 5 mmscmd (million standard cubic meters per day) of gas, which would be supplied to 15 urea units of major fertiliser companies. Subsequently, production would be increased to 120 mmscmd in various tranches. It may be noted that there has been a long drawn litigation over the supply and payment of gas from the KG basin. But, in the mean time the court has allowed RIL to sell the gas. Hence, much depends on the final verdict of the court which is expected to be announced by the end of this month. Electronics giants, Samsung Electronics and LG Display expect the next year to be a difficult one. They expect demand to remain bleak from the developed markets, namely US and Europe. It may be noted that Samsung posted its first ever quarterly loss in January, while LG recorded a loss in the fourth quarter as well. Defense to the rescue of auto Markets moved into a higher orbit during the previous hour of trade on account of sustained buying activity across the index heavyweights. Stocks from the construction, auto and telecom sectors are leading the pack of gainers currently. The overall advance to decline ratio is poised at 1.7 to 1 on the BSE. The BSE Sensex and the NSE Nifty are trading higher, up by almost 350 points (4.2%) and 85 points (3.3%) respectively. The BSE Midcap and Smallcap indices are also trading higher by 2.5% and 1.5% respectively. The rupee is trading at 51.63 to the dollar. Automobile stocks are trading strong, led by gains in Tata Motors, M&M, and Ashok Leyland. Gains in these stocks is seemingly on the back of news reports that India’s defense forces are planning to place large scale orders to buy vehicles to meet their requirement for next two years. As per a leading business daily, the procurement plan is awaiting government’s approval and would result in orders to the tune of around Rs 30 bn to Rs 40 bn for the auto sector, spread over next two quarters. It may be noted that the defense outlay has been increased by Rs 200 bn to Rs 1,417 bn for the next year. Around 2% to 3% of the above outlay would be spent on the procurement of armoured and other defense related vehicles. Telecom stocks are trading higher. Gains are seen in Tata Communications and Reliance Communications. As per a leading business daily, Tata Communications management sees no liquidity problem in future. The company had raised a debt of around US$ 350 m in 2008. Currently, the company has around US$ 300 m cash reserves. It may be noted that the company had earlier approached the government, a 26% stakeholder, for changes in the shareholder agreement to raise additional funds. Tata Communications plans to incur a capex of around US$ 400 to US$ 500 m in FY10 which is nearly same as in FY09. This FY10 capex estimates does not include the provision for upcoming auction of WiMAX as the company sees no problems in terms of raising funds for the auction. In fact, the company has been receiving lot of interest from the lenders for the WiMAX project. 12:30 pm GSK extends brand ‘Horlicks’ The Indian markets continued to trade in the green on the back of continuous buying activity during the previous two hours of trade. Stocks from the realty and banking sectors are leading the pack of gainers, while select stocks from the power and engineering sectors are trading weak. The overall advance to decline ratio is poised at 1.8 to 1 on the BSE. The BSE Sensex and the NSE Nifty are trading higher, up by around 290 points and 70 points respectively. The BSE Midcap and Smallcap indices are also trading higher by 2.2% and 1.5% respectively. The rupee is trading at 51.68 to the dollar. Pharma stocks are trading firm led by led by Dr. Reddy’s and Ranbaxy. Dr. Reddy’s has received a favourable summary judgment from an US court in the litigation relating to Astra Zeneca’s ‘Prilosec OTC’. It was held that Dr. Reddy’s ‘Omeprazole Mg OTC’ ANDA (abbreviated new drug application) filling does not infringe the patent of Astra Zeneca’s ‘Prilosec OTC’. Further, the company has submitted Para IV filling for the drug and is awaiting the US FDA approval. The drug is used for treatment for heartburn and has an estimated market size of US$ 362 m in the US. As of December 2008, US market contributed around 26% of the company’s total revenues. FMCG stocks are trading mixed. While Nestle is trading firm, GSK Consumer is trading marginally down. As per a leading business daily, GSK Consumer has decided to create different products for urban and rural markets under its flagship brand ‘Horlicks’. The company is in process of developing different products in order to target the different health needs of rural and urban consumers. The company plans to launch 3 new products under the brand during CY09. It may be noted that the company has extended the Horlicks to the biscuits category in the eastern and southern markets. 10:30 am Wipro inks US$ 228 m deal, stock up Mirroring their global peers, the Indian markets have started the day’s proceedings on a positive note. Buying activity is being witnessed across the board. While stocks from the realty, banking and software sectors are garnering investors’ interest, select stocks from the FMCG and consumer durable sectors are out of favour. The overall advance to decline ratio is poised at 2.7 to 1 on the BSE. As regards the global markets, while the US market ended firm, European markets ended flat yesterday. The Asian markets are currently trading in the green. The BSE Sensex and the NSE Nifty are trading higher, up by around 235 points and 62 points respectively. The BSE Midcap and Smallcap indices are trading higher, up by 1.8% and 1.4% respectively. The rupee is trading at 51.72 to the dollar. Software stocks are trading firm led by HCL Tech, Infosys and Wipro. As per a leading business daily, Wipro Ltd has inked a six and half year outsourcing contract from Employees State Insurance Corp. The deal is worth 11.8 bn (US$ 228 m). Wipro will help ESIC in implementing its project ‘Panchdeep’ which is aimed at improving healthcare services to its beneficiaries, by providing online facilities to employers and insured people for registration, payment of premium and disbursement of cash benefits. Wipro will also provide HR, Finance and General Administration programs for increasing the organisational efficiency. This deal will help Wipro in growing its revenue and increase its presence in domestic market. Engineering stocks are currently trading firm led by Praj Engineering, Punj Lloyd and Voltas. As per a leading business daily, BHEL is planning to join the consortium of Areva and Bharat Forge for its proposed nuclear forging business to produce nuclear forgings to meet global as well as indigenous requirements. It may be noted that Areva and Bharat Forge have already signed a memorandum of understanding (MoU) to form a joint venture. BHEL is preparing to join this consortium as it has dropped its plan to set up a separate nuclear forging and casting venture due to unavailability of a suitable technology provider. Such forgings which are required for nuclear power reactors are currently being imported. Thus an integrated melting and forging facility of this kind will help the BHEL lessen its reliance on imports.