Wednesday, May 6, 2009

Closing Bell 06-05-09

Closing Bell 06-05-09

Profit booking at higher levels led the indices to lose further ground during the final hour of trade. The BSE-Sensex ended the day with losses of around 180 points, while the NSE-Nifty closed lower by about 35 points. Stocks from the mid-cap and small-cap space ended the day on a weak note, lower by 1% and 0.2% respectively. Selling activity was witnessed in stocks across sectors, led by realty and banking. Power stocks, however, ended the day marginally in the green.

Most of the other Asian markets ended the day on a firm note. The European indices are currently trading firm as well. Rupee was trading at 50.6 against the US dollar at the time of writing.

As per a leading business daily, L&T plans to set up three more operating companies in the defense, aerospace and nuclear power businesses. The company plans to create these companies over the next three to four years. As of now, these businesses fall under the company’s heavy engineering division, which focuses on manufacturing and supplying the critical equipment and systems to core sector industries. This move will help the company focus on each business segment separately. For instance, L&T has already made a plan to invest Rs 2 bn in defense and related business alone over the next three years. It may be noted that the company is looking to emerge as a major player in each of these areas and intends to do this by enhancing its expertise either by itself or by joint ventures and collaborations with other companies. The stock of L&T, along with its peers Punj Lloyd and BHEL, ended the day on a weak note.

Auto stocks ended the day on a weak note led by Ashok Leyland, Maruti Suzuki and Tata Motors. As per a leading business daily, M&M has increased its market share in the SUV (sports utility vehicle) segment to nearly 65% (during April) from 47% a year ago. This is on the back of models like Xylo, Bolero and Scorpio, recording strong sales and subsequently taking the top three positions in the SUV segment. As per the management, the demand for vehicles has perked up since October last year and the trend is expected to continue in the coming few months. During the month of April, M&M saw a 16% increase in sales (including joint ventures). In addition, the company’s newly launched SUV, Xylo has also helped boost sales. As per the company, the company has delivered over 10,000 Xylos till date.

The International Monetary Fund (IMF) has downgraded its growth outlook for Asia, predicting a long and severe recession for the region's wealthier but export-reliant economies. It expects growth to slow down to 1.3% this year as compared to initial forecast of 2.7%. For emerging nations in Asia, which excludes Japan, the IMF lowered its growth forecast to 3.3% from 4.4%. It expects China to grow at the rate of 6.5% in 2009 as aggressive policy response is expected to boost domestic demand, while India is forecasted to grow at the rate of 4.5%. According to the agency, the Indian economic growth will slow down as global credit conditions and inadequate investments are likely to arrest the growth of the economy.

The Indian markets remained volatile on account of alternate bouts of buying and selling activity witnessed during the previous two hours of trade. Currently, stocks from the steel, banking and construction sectors are leading the pack of losers, while select stocks from the engineering, energy and cement sectors are trading firm. The overall advance to decline ratio is poised at 1.6 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are trading weak, down by around 40 points and 5 points respectively. The BSE Midcap and Smallcap indices are trading higher, up by 0.4% and 1.2% respectively. The rupee is trading at 49.43 to the dollar.

Auto Ancillaries stocks are trading higher led by Bharat Forge and Mahindra Forgings. As per a leading business daily, the government is planning to impose safe guards and anti dumping duties on import of auto components in order to protect the domestic industry. It plans to take measures against the import of cheap auto components either in the form of safeguard duty if it is universal or an anti-dumping duty if it is country-specific. However, for this the government has asked the domestic component makers to support their demand with adequate data about imports and on which components or parts they needed protection. It may be noted that imports accounted for around 31% of the total Indian component market in FY09. While the government is considering levying anti dumping duty, auto component makers feel that such measures will not work in case of manufactured products. Besides, major vehicle manufacturers will unlikely pass this measure without opposition due to cost economics.

Pharma stocks are trading mixed currently. While Cipla and Glenmark Pharma are trading weak, Ranbaxy and Cadila Healthcare are trading higher. As per a leading business daily, Cadila Healthcare has received an approval from the US FDA to market its drug ‘Mycophenolate Mofetil’ which is an immunosuppressant used in organ transplant. It will sell ‘Mycophenolate Mofetil’ tablets in the strength of 500 mg and capsules in the strength of 250 mg in the US market. It may be noted that the estimated sales for this tablet stood at US$ 648 m in 2008, while capsules sales were around US$ 316 m during the same period. This will enable the company to increase its revenue from the highly competitive US generics market. Cadila Healthcare has so far received 46 USFDA approvals and has filed 92 ANDAs since the start of the filing process in FY04.

The markets gained ground during the previous two hours of trade on the back of buying activity witnessed at lower levels. Stocks from the engineering and power sectors are leading the pack of gainers, while select software and banking stocks are trading weak. The overall advances to decline ratio is poised at 2.2 to 1 on the BSE.

The BSE-Sensex index is trading flat currently, while the NSE-Nifty index is trading firm, up by around 10 points. The BSE-Midcap and BSE-Smallcap indices are trading firm, up by around 1.4% and 2.1% respectively. The rupee is trading at 49.49 to the dollar.

Engineering stocks are trading firm led by ABB and BHEL. As per a leading business daily, BHEL plans to invest Rs 120 bn over the next four years in order to ramp up its manufacturing capacity to support power generation equipment to the tune of 20,000 MW (megawatts). Besides increasing its capacity, BHEL will pick up equity stakes in more power plants. The company's current manufacturing capacity can support 10,000 MW of power generation. As BHEL is a cash rich and debt free company, the proposed investment plan would be met from internal accruals and is unlikely to be affected by the current liquidity crunch.

Software stocks are trading mixed. While Tech Mahindra is trading firm, Wipro and TCS are in the red. As per a leading business daily, Wipro has been awarded a 9 year IT outsourcing contract from Unitech Wireless. Unitech Wireless is the telecom arm of Unitech, in which the Norwegian telecom company, Telenor holds a majority stake. Wipro will deploy a component based service delivery platform in order to provide a wide range of services. While Wipro has not divulged any financial details, it is believed that the contract is worth between Rs 25 bn to Rs 28 bn. This is the second such contract that the company has won in India in the recent past. Earlier, it had received a 6 year deal from the Employee State Insurance Corporation worth Rs 12 bn. This move will help Wipro to enhance the share of its domestic segment in overall revenues.