Tuesday, June 9, 2009

Closing Bell 9th June 2009

Closing Bell 9th June 2009

The Indian markets made up for yesterday's losses as they ended the day on a strong note. The BSE-Sensex ended the day higher by around 460 points, while the NSE-Nifty closed higher by about 130 points. Stocks from the mid-cap and small-cap spaces ended the day on a firm note as well, recording gains of 3.1% and 1.5% respectively. Buying activity was witnessed in stocks across sectors led by realty, IT and capital goods. At the time of closing, the overall advance to decline ratio was poised at 1.1 to 1 on the BSE.

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

Following the Maharashtra government's decision to increase the value added tax by 8% to 20% on cigarettes, ITC, in a move to safeguard itself from the added taxes, has decided to increase the price of its cigarettes in the coming future. This move will help the company protect its margins in the face of more taxes and rising input costs. As per a leading business daily, the company is likely to hike prices of its premium brands by nearly 7%, though it has not confirmed the same. It may be noted that the company's rival brand had increased cigarette prices by nearly 11% recently. While the margins may improve on account of price hikes, volumes would be affected. Maharashtra accounts for nearly 10% of its total volumes. This would be a further blow as the company had already witnessed a 3.5% YoY decline in the total cigarette volume sales during FY09.

Retail stocks ended the day on a firm note led by Pantaloon Retail, Shopper's Stop and Koutons Retail. As per a leading business daily, Pantaloon Retail plans to raise additional long-term funds worth Rs 10 bn in various tranches through issuance of securities to various investors. The company would raise funds through a mix of public-private offerings or preferential allotments. The funds raised would be deployed to scale up its retail space to 30 m sq ft from the current 13 m sq ft. The company had earlier planned to expand its retail space by 2012. However, various issues such as the slowdown in consumption activity, falling footfalls, lack of easy availability of funds, and issues on the real estate front amongst others forced retailers to defer their expansion plans. As such, the raised funds would now enable the company to go ahead with its expansion plans after witnessing a delay of a year or two.

Prime Minister Manmohan Singh is of the belief that the Indian economy can clock a growth rate of about 8% to 9%. The rationale behind this thought is the high savings rate (of nearly 35%) that the country has. Dr. Singh believes that the main reason for the fall in GDP growth in the previous fiscal was lower investments. He further added that India will be in a position to clock a growth rate of 7% in the current fiscal. It may be noted that the RBI has projected a growth rate of 6%.

The Indian markets continued to move upwards on account of sustained buying activity witnessed during the previous two hours of trade with Sensex breaching the 15,000 mark again. Almost all the sectors are trading in the green with stocks from the realty, IT, metal and consumer goods sectors leading the pack of gainers. The overall advance to decline ratio is poised at 0.79 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 409 points and 105 points respectively. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 1.99% and 0.49% respectively. The rupee is trading at 47.48 to the dollar.

Power stocks are trading firm led by Tata Power and Power Grid. As per a leading business daily, state owned Power Trading Corporation (PTC) is all set to acquire coal properties overseas in order to meet the growing domestic demand. The company has shortlisted mines in coal rich countries like Indonesia and Australia and is eyeing assets giving 15 million tonnes (MT) of coal per year. It has already committed supplies of the order of 1.5 MT per year to two 250 MW power projects for the next 25 years. It sees spurt in demand with orders for 5,000 MW power projects coming its way. These contracts shall enable PTC to secure long-term association with buyers and sellers, thereby making itself immune to competition, and simultaneously tie up long-term source of power for its trading activity.

As a respite to the plagued energy sector, the coming budget might extend a seven-year tax holiday presently given to crude oil explorers to producers of natural gas as well. The uncertainty started when last year the Finance Minister proposed to redefine mineral oil so as to exclude petroleum and natural gas. This meant depriving the natural gas producers from the benefits of the tax holiday. Later the finance ministry withdrew the definition. Hopefully the coming budget will clarify the ambiguity and will benefit companies like Reliance and ONGC. Stocks from the oil and gas sector are trading firm.

Persistent buying among the index heavyweights led the Indian markets to register strong gains during the previous two hours of trade. Currently, stocks from the software, metals and realty sectors are leading the pack of gainers, while select energy and power stocks are trading weak. The overall decline to advance ratio is poised at 1.6 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading firm, up by around 300 points and 75 points respectively. The BSE-Midcap index is trading higher by 0.9%, while the BSE-Smallcap index is trading lower by 0.4%. The rupee is trading at 47.57 to the dollar.

Telecom stocks are trading mixed. While RCOM is trading firm, Bharti Airtel is in the red. As per a leading business daily, Reliance Communications (RCOM) is likely to award an operations and maintenance contract worth US$ 500 m to US$ 600 m to the French telecom infrastructure major, Alcatel-Lucent. It may be noted that RCOM had entered into a joint venture agreement with the French major in May 2008 for an outsourcing contract from global telecom operators. This contract would either be executed independently by Alcatel-Lucent or the JV. The outsourcing contract will help in the operation of RCOM's GSM network and for maintenance and development of the company's 175,000 km global optical cable fibre systems. This move is in line with RCOM's initiative to improve competitiveness by enhancing network quality and thereby reduce operational expenditure and bring in quality standards.

FMCG stocks are trading higher led by HUL and Colgate. As per a leading business daily, HUL has deferred the stake sell of 49% in its BPO unit to Capgemini SA by a year. The company had earlier divested 51% stake in its BPO operations to focus on its core business of home and personal care and foods. However, the company had planned to sell the remaining 49% stake by March 2009, which has now been deferred to March 2010. Although, the agreement of deferment was made on mutual decision of both the companies, they have not divulged the reason for the same. It is believed that differences in the valuations are the main issue. It may be noted that the global slowdown has affected the valuations of companies, as prices are much lower than what they were before the crisis started.