Closing Bell 2 April 2009

Closing Bell 2 April 2009

Leading gains in Asian region

While the markets ended well above the dotted line, they shed a part of their gains during the final hour of trade. The BSE-Sensex closed with gains of around 450 points, while the NSE-Nifty closed higher by about 150 points. Stocks from the mid-cap and small-cap space ended the day in the green as well. Barring FMCG stocks, buying activity was witnessed in stocks across sectors led by realty, metal, capital goods and energy.

Most other Asian markets ended on a firm note. The European indices are currently trading firm as well. Rupee was trading at 50.3 against the US dollar at the time of writing.

Engineering stocks ended the day on a firm note led by Punj Lloyd, Emco and Suzlon. L&T has bagged orders worth Rs 52 bn over the past week. On the back of these announcements, the stock has moved up by nearly 16% over its last week’s closing price. The company has bagged two orders worth Rs 13 bn from MRPL. The scope of the projects is to enhance and upgrade the company’s fuel quality. The company also won two orders from Tata Steel worth Rs 11 bn. Apart from this, the engineering major won a contract of Rs 12.5 bn for the construction of a dam package, part of the 1,200 megawatts Punatsangchhu-I Hydroelectric project in Bhutan. The company also won other projects for supplying critical equipment to NPCIL and a slew of orders in the electrical construction sector. It may be noted that at the end of December 2008, the company had an order backlog of Rs 688 bn which is nearly 3 times its FY08 sales.

Inflation numbers as measured by the wholesale price index (WPI) ended at 0.31% for the week ending March 21. This is higher than last week’s number of 0.27%. The reason behind this increase is on account of higher prices of certain foods items such as tea, gur, aerated water and imported edible oil. In the corresponding period in the previous year, the inflation stood at 7.8%.

Auto stocks ended the day on a firm note led by Tata Motors and M&M. Bajaj Auto announced the sales volumes for the month of March 2009. While sales of the two wheelers segment declined by 15% YoY, the three wheelers segment recorded a mere 3% YoY growth. If one compares the month’s total sales figures to the December 2008 figures, then the domestic motorcycle sales have increased by 51%. This is largely due to higher sales of its newly launched vehicle, XCD 135 DTS-Si model, which was launched at the end of January 2009. The stimulus package announced by the government also aided the sales growth. As per the company, it expects stronger growth during 1QFY10 on account of the launch of the new model.

The markets continued with their upward trend as buying activity intensified during the previous two hours of trade. Barring Hero Honda and Sun Pharma, almost all stocks are trading higher on the Nifty. The overall advance to decline ratio is poised at 4 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading higher, up by 500 points and 160 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading higher, up by 4.2% and 3.5% respectively. The rupee is trading at 50.28 to the dollar.

Automobile stocks are trading higher led by Tata Motors, M&M and Maruti. As per a leading business daily, Tata Motors’ domestic sales declined by around 13% YoY in March 2009. However, it registered a growth of around 24% as compared to February 2009. This was mainly due to the stimulus package announced by the government and lower interest rates. Export sales declined by around 69% YoY in March 2009. It may be noted that while commercial vehicles sales fell by around 19% YoY, cars and utility vehicles sales declined by 4% YoY during the same period.

Cement stocks are trading higher led by Madras Cements, ACC and Ultra Tech. As per a leading business daily, cement manufacturers have raised the domestic prices of cement by Rs 3 to Rs 7 per 50 kg bag across the country. This was mainly on account of increase in demand from the rural markets and government projects.  It may also be noted that cement manufacturers had been facing pressure on their margins on account of increase in the transportation cost. This rise in price will help them to safeguard their margins and pass on the impact of higher input costs. Cement majors like ACC, Grasim and Ultra Tech have raised the prices, while regional and midsized players are likely to follow the suite as demand is picking.

The Indian bourses continued their upward journey as buying activity continued during the previous two hours of trade. Realty, metals and banking stocks are leading the pack of gainers, while select auto stocks are trading weak. The overall advance to decline ratio is poised at 3.9 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading higher, up by 440 points and 130 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading higher, up by 3.5% and 3.2% respectively. The rupee is trading at 50.32 to the dollar.

FMCG stocks are trading in the green led by P&G and HUL. As per a leading business daily, HUL has slashed prices of its soaps and detergents category in a range of 4% to 20%. The company has cut the prices through a combination of both, by an increase in the weight of the packs and a reduction in the maximum retail prices. It may be noted that during the 4QCY08, HUL had witnessed a decline in sales volume in this category as it had taken price hikes earlier. The company’s performance was further affected during the same period on account of down trading and reduction in prices by competitors. The segment contributes around 40% to the total revenues. This move is in line with HUL’s strategy to maintain its market share.

Pharma stocks are also trading firm led by Panacea Biotec, Cipla and Pfizer. Pfizer had recently announced its 1QCY09 results. The topline witnessed a growth of 22% YoY, largely led by its pharmaceuticals (up 22% YoY) and animal health businesses (up 38% YoY). But the gross margins declined by 2% YoY due to the rise in raw material costs (as percentage of sales) from 21.7% in 1QCY08 to 26.4% in 1QCY09. The rise in the raw material cost is attributed to increase in the Vitamin C prices, which cannot be passed to the consumer as it falls under the drug price control mechanism. On the bottom line side, excluding the extraordinary items during the corresponding quarter last year, the profits witnessed a growth of 10% YoY

Maruti to phase out M800, stock up

Mirroring their global peers, the Indian markets started the day’s proceeding on a positive note. Buying is being witnessed across the board. While stocks from the banking, realty and metal sectors are garnering investors’ interest, select stocks from the software, pharma and FMCG sectors are out of favour. The overall advance to decline ratio is poised at 4.8 to 1 on the BSE. As regards the global markets, the US market and European markets ended in positive territory yesterday. The Asian markets are currently trading firm.

The BSE Sensex and the NSE Nifty are trading higher, up by around 370 points and 120 points respectively. The BSE Midcap and Smallcap indices are also trading higher, up by 2.3% and 2.1% respectively. The rupee is trading at 50.37 to the dollar.

As per a leading business daily, Sintex Industries has lowered its capital expenditure for FY10 by around 35% mainly on account of economic slowdown. The company would now spend around Rs 3.3 bn in FY10 as against Rs 5 bn projected earlier. The company is planning to spend nearly Rs 1.5 bn in India to augment its capacity in prefabricated building segment. Sintex would also spend around Rs 750 m on Nief Plastic SA, a fully-owned French subsidiary, and Rs 500 m each on Zeppelin Mobile Systems India and Bright AutoPlast India. The company is facing slowdown in some of its sub-segments, like BT-shelter business and electrical business. Hence, the move to lower the capex plans is in line with its business strategy. The stock is currently trading higher.

Automobile stocks are trading firm led by Maruti Suzuki, Tata Motors and M&M. As per a leading business daily, Indian automobile major Maruti Suzuki has decided to stop selling its 800 model and Omni vans from 2010 due to tighter emission norms. The company will stop selling these models in 11 cities which includes four metros. With growing competition and demand in the small car segment, absence of these models from 11 major cities is likely benefit its rival. However, the exit from these cities is not likely to have material impact on Maruti’s performance as demand for these models in the metros is miniscule.