Thursday, June 11, 2009

Closing Bell 11th June 2009

Closing Bell 11th June 2009

After witnessing a volatile trading session today, the Indian markets ended the day on a weak note as selling activity increased during the final minutes. The BSE-Sensex ended lower by around 60 points, while the NSE-Nifty, closed lower by about 15 points. Stocks from the mid-cap and small-cap spaces ended the day on a negative note as well, recording losses of around 0.2% and 0.9% respectively. Stocks from the metal, auto and FMCG spaces managed to garner the investors’ interest today, while stocks from the IT and energy sectors led the pack of losers.

Other Asian markets ended the day on a mixed note today. The European indices are currently trading in the green. Rupee was trading at 47.5 against the US dollar at the time of writing.

Telecom stocks ended the day on a firm note led by Spice Communication, Idea Cellular and MTNL. Telecom major, Bharti Airtel recently signed a three-year managed services contract for its value added services (VAS) with its group company Comviva Technologies. As part of the contract Comviva will manage the company’s VAS nodes from various partners. However, financials of the deal have not yet been disclosed. This is a positive development for Bharti as this would primarily allow the company to focus on its key strengths of marketing and branding. In addition to this, the company will be in a position to save costs and also roll out better and larger number of value added services. It may be noted that the company has signed deals of similar nature with Ericsson and Nokia to manage its network and IBM for IT management.

Energy stocks ended the day on a weak note led by HPCL, BPCL and ONGC. As per a leading business daily, state run oil marketing companies (OMCs) plan to approach the government for revision of retail fuel prices on account of the rise in global crude oil prices. It is believed that the OMCs are currently recording losses of around Rs 3 per litre on petrol sales and Re 1 per litre on diesel sales. On an average, OMCs are making daily losses of around Rs 1.2 bn on sale of fuel. According to one of the state run oil marketers, OMCs start making losses on fuel sales once the price of crude oil crosses US$ 65 a barrel. Currently, oil prices have been flirting with the US$ 70 per barrel mark. It may be noted that the OMCs last revised retail fuel prices in January this year when the price of crude oil was around US$ 42 per barrel.

Inflation (as measured by WPI) for the week ending May 30 stood at 0.13%. This is the lowest figure recorded in around three decades. Last week, the figure stood at 0.48%. The main reason behind this fall was the decrease in prices of manufactured products. However, prices of food items increased on a week on week basis. It may be noted that inflation during the same week last year stood at 9.32%.

Though the markets continued to trade in the negative territory during the previous two hours of trade, they have shed some of their earlier losses on account of buying activity witnessed at lower levels. Stocks from the energy and cement sectors are leading the pack of losers, while select stocks from the telecom, aluminium and auto sectors are trading firm. The overall decline to advance ratio is poised at 1.5 to 1 on the BSE.

The BSE-Sensex is trading weak, down by around 20 points, while the NSE-Nifty is trading firm, up by around 10 points. The BSE-Midcap and BSE-Smallcap indices are trading higher by around 0.3% and 0.6% respectively. The rupee is trading at 47.48 to the dollar.

Software stocks are trading mixed. While Infosys and Wipro are trading lower, Tech Mahindra is trading higher. As per a leading business daily, Indian software majors like Wipro and Infosys are set to enter the booming domestic rural outsourcing market. Wipro BPO, a US$ 395 m back office service arm of Wipro is exploring service delivery tie ups with several rural service providers to whom it already provides technology and other supports. Infosys BPO on the other hand, plans to tie up with service providers with shops in rural areas and small towns for its domestic operations. It may be noted that as per Nasscom, the Indian IT majors used to primarily cater to the global clients. However, with the fall in global demand and more focus on the domestic markets, the sector has gained some of the lost momentum. The cost of operations in rural markets are estimated to be around 60% less as compared to Tier I or II cities.

Power stocks are trading mixed. While Tata Power is trading lower, NTPC is trading higher. As per a leading business daily, Tata Power is set to enter the retail distribution business of power in Mumbai. The company already has a distribution license for Mumbai and is awaiting Maharashtra Electricity Regulatory Commission's (MERC) approval for the same. The company is planning to target new customers in all three segments viz commercial, industrial and residential spaces and will also continue with its bulk electricity supply business, which remains a major growth driver. It may be noted that Tata Power's main business has been electricity generation and bulk supply to Mumbai metropolitan area regulated by MERC. It also supplies power to distributors like Reliance Energy, Brihanmumbai Electric Supply and Transport in Mumbai and North Delhi Power in Delhi. This is a positive development for the company as the return on equity in power distribution is on the higher side as compared to the generation business.

The Indian markets continued to trade in the red as weak sentiment prevailed during the previous two hours of trade. Currently, stocks from the energy, banking and software sectors are leading the pack of losers, while select telecom and auto stocks are trading firm. The overall decline to advance ratio is poised at 1.8 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading weak, down by around 50 points and 25 points respectively. The BSE-Midcap and BSE-Smallcap are also trading lower, down by around 0.1% and 0.6% respectively. The rupee is trading at 47.46 to the dollar.

As per a leading business daily, the country's largest lender, SBI plans to grow through acquisitions and will consolidate its associate banks. Besides, the bank is also planning to look for acquisition of domestic banks. SBI will decide on consolidation of its associates next month and believes that it will not take more than 3 to 6 months after the process begins. It may be noted that the bank had merged State Bank of Saurashtra in August 2008 and now it has six associate banks. The bank also has a positive view regarding the government's support for the consolidation process. Regarding lending rates, the bank expects interest rates to remain soft going forward and plans to review the rates by the end of the current month. Banking stocks are trading weak led by SBI, Corporation Bank and PNB.

Software stocks are trading mixed. While Tech Mahindra is trading firm, Infosys and Wipro are in the red. As per a leading business daily, Infosys expects its Latin American business to grow the fastest going forward. Although the segment's contribution is miniscule to its total revenues, it expects higher growth as IT operations have not expanded at a strong pace in the region. In a move to diversify its operations which are concentrated on the North American region (around 63% of the company's total revenues during FY09), Infosys has been looking to expand its operations in regions like Latin America, Brazil, Europe, Asia and the Middle East, that present immense scope going forward. In fact, the company is soon to start operating its second centre in the Latin American regions of Monterrey and Mexico.

The Indian markets have opened the day's proceedings on a cautious note. Power, telecom and metals stocks are trading firm, while software, auto and banking stocks are among the losers. The overall advance to decline ratio is skewed towards the latter in the ratio of 1.74 to 1 on the NSE. As regards global markets, the US markets ended marginally in the red as rising commodity prices raised fears of inflation which would affect the recovery effort. The European markets closed higher yesterday. The Asian indices are currently trading mixed.

The BSE Sensex is trading lower by around 10 points. The NSE Nifty is down 10 points. The BSE Midcap and BSE Smallcap index are both trading flat. The rupee is trading at 47.44 to the dollar.

Larsen & Toubro (L&T) is planning to sell its entire 11.5% stake in UltraTech Cement. The company sold 8.3% stake through a series of off-market deals yesterday for around Rs 7.6 bn. UltraTech is a group company of the Birlas. As per the agreement made between the companies in 2003, the Birla group enjoyed the right of first refusal on L&T's holding. The same agreement also made it clear that in case the Birlas do not exercise their rights, L&T had the liberty to sell its shares to financial investors through open market operations. L&T was, however, not allowed to sell the shares to strategic investors. The Aditya Birla Group waived its first right of refusal mainly because it already had a comfortable 55% stake. As per the pact, L&T had to sell its stake by the end of 2009. The move is in line with L&T's objective to pull out of cement which is not part of its core operations. Engineering stocks are trading mixed.

Mahindra & Mahindra (M&M) is planning to buy out its local partner in Mahindra South Africa (Mahindra SA). M&M holds 92% in Mahindra SA, while the remaining 8% stake is held by African Automotive Investments Corporation, a subsidiary of African Resources and Logistics Corporation. Mahindra SA sells the Bolero, Scorpio and Xylo ranges in South Africa. It had sold over 1,500 vehicles in the local market last year. M&M is also evaluating the possibility of starting a local completely knocked down (CKD) assembly unit there. The company already has an assembly plant in Egypt. Logistics costs and potential import duty benefits are the key drivers behind the decision to have a local assembly unit. The move to buy the stake is a part of its plan to build the brand and take independent decisions. The company is looking at serving the adjoining markets like Zambia, Angola, Zimbabwe and Botswana, among others. It will also give an advantage in serving the US markets through its local assembly in South Africa. The African Growth and Opportunity Act provided duty-free access to the US for a large number of products from over 35 African economies. Infact, M&M has plans to enter the US market with its Scorpio later this year. Auto stocks are also witnessing mixed sentiments.