Closing Bell 20th May 2009

Closing Bell 20th May 2009

The Indian markets continued their downward trend during the final hour of trade as profit booking amongst the index heavyweights led the BSE-Sensex to end the day with losses of around 240 points. The NSE-Nifty closed lower by about 50 points. However, stocks from the mid-cap and small-cap space ended higher by 6.3% and 9.1% respectively. Buying activity was witnessed in stocks from the metals and auto sectors, while stocks from the banking and energy spaces ended the day on a weak note.

Other Asian markets ended the day on a mixed note. The European indices are currently trading in the green. Rupee was trading at 47.6 against the US dollar at the time of writing.

Capital goods stocks ended the day on a firm note led by Praj Industries, Punj Lloyd and Areva T&D. Crompton Greaves announced its FY09 results today. The company recorded a topline growth of about 28% YoY, while its operating profits grew by 33% YoY. The company witnessed an operating margin expansion of 0.5% YoY (to 11.5%), mainly on account of lower cost of traded goods (as a percentage of sales). Raw material cost, on the other hand, increased by 0.3% YoY (as a percentage of sales). Profits for the year grew by 38% YoY. Apart from a good performance at the operating level, lower depreciation and interest costs helped the company accounted for the growth in earnings.

Steel stocks ended the day on a firm note led by Tata Steel, JSW Steel and SAIL. Tata steel ended the day on a strong note on the back of news that it has secured loans to the tune of Rs 20 bn from the Life Insurance Corporation of India (LIC). As such, LIC will subscribe to a portion of Tata Steel’s non-convertible debentures (NCDs). It is believed that the issue carries an interest rate of 10.5% per annum. It may be noted that Tata Steel has plans to raise a total of Rs 30 bn through the issue of NCDs. The company plans to utilise a portion of the proceeds to prepay its debt obligation and the balance will be retained to enhance the capital base of its UK subsidiary.

The Centre for Monitoring Indian Economy (CMIE) expects the WPI inflation rate to remain at 0.1% during FY10. Inflation for FY09 stood at about 8.3%. CMIE has predicted that the price of fuel products and manufactured goods are set to fall during the year, while those of primary articles will remain higher. In addition, it has projected that a lower money supply growth and an increase in capacity expansions during FY10 will keep inflation at a lower level.

The markets continued their southward journey during the previous two hours of trade on account of sustained selling activity witnessed across large cap stocks. However, midcap and smallcap stocks remained firmly in the green. Stocks from the auto, steel and power sectors are leading the pack of gainers, while select stocks from the banking, telecom and engineering sectors are trading weak. The overall advance to decline ratio is posed at 7 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading weak, down by around 200 points and 40 points respectively. However, the BSE-Midcap and BSE-Smallcap indices are trading higher, up by around 6% and 8% respectively. The rupee is trading at 47.58 to the dollar.

Energy stocks are trading mixed. While HPCL and BPCL are trading lower, ONGC and Indian Oil are trading higher. As per a leading business daily, the government has issued bonds worth Rs 103 bn to the three public sector oil marketing companies (OMCs) Indian Oil, HPCL and BPCL in order to partially compensate for their revenue losses in FY09 due to government determined prices. Indian Oil received bonds of around Rs 62 bn, whereas BPCL and HPCL were allotted bonds worth Rs 20.3 bn and 20.7 bn respectively. It may be noted that the government controls the prices of four petroleum products petrol, diesel, kerosene and cooking gas. The prices for these products have often been below the cost, resulting in a revenue loss of around Rs 1 trillion during the fiscal. The government has so far issued oil bonds worth Rs 610 bn to the OMCs. Furthermore, the OMCs have also received a discount of Rs 320 bn from the upstream companies like GAIL and ONGC.

Automobile stocks are trading mixed. While Tata Motors and Maruti are trading higher, Bajaj Auto and Hero Honda are trading lower. As per a leading business daily, Tata Motors has raised around Rs 12.5 bn (US$ 260 m) by selling non convertible debentures (NCDS) to LIC in order to partly fund the refinancing of bridge loan taken for the Jaguar Land Rover (JLR) acquisition. The NCDs bear a coupon rate of 10% and have a maturity of seven years. It may be noted that Tata Motors raised a bridge loan of around US$ 3 bn for the JLR acquisition in FY09. The company had already repaid bridge loan of around US$ 1.12 bn through funds raised from the rights issue and sale of stakes in subsidiaries. The company has plans of raising around Rs 40 bn (US$ 840 m) through NCDs, having multiple tenures ranging from 2 to 7 years.

The Indian markets traded below the dotted line during the previous two hours of trade on the back of intense selling activity among the index heavyweights. Stocks from the engineering, metals and auto space are trading firm, while select banking and pharma stocks are trading weak. The overall advance to decline ratio is poised at 6.1 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading weak, down by around 150 points and 35 points respectively. However, the BSE-Midcap and BSE-Smallcap indices are trading higher, up by around 5% and 6% respectively. The rupee is trading at 47.71 to the dollar.

Engineering stocks are trading firm, led by Thermax, Punj Lloyd and L&T. As per a leading business daily, Punj Lloyd plans to exit its joint venture in the real estate business by selling its entire 50% interest to its equal partner, Ramprastha group. It may be noted that, the company had made initial investments to the tune of Rs 1.8 bn in the joint venture. The joint venture was supposed to develop residential projects on 29 acre of land in Ghaziabad. Punj Lloyd was supposed to do the entire construction work for the project. However, considering the state of the real estate scenario in the country today, the management has shelved its plans.

As per a leading business daily, Britannia plans to consolidate its manufacturing facilities and realign operations. The company will also rework its distribution strategy. This will help the company to bring in operating efficiencies in necessary areas. As such, it will also help the company review its transportation costs. With company facing intense competition in the business along with an increase in the input costs, these measures will help it least maintain its margins going forward. The stock is trading firm, while Dabur is in the red.

The Indian markets have started the day's proceedings on a volatile note. While engineering and metal stocks are trading higher, telecom stocks are leading the pack of losers. The overall advance to decline ratio is poised at 5.7 to 1 on the NSE. As regards global markets, while the US markets ended mixed on account of a 13% drop in homebuilding starts, the European markets closed higher yesterday. The Asian indices are currently showing mixed vibes.

The BSE Sensex and the NSE Nifty are trading higher by around 25 points and 7 points respectively. The BSE Midcap and BSE Smallcap index are both trading higher by 3%. The rupee is trading at 47.91 to the dollar.

Grasim announced its FY09 results yesterday. On a standalone basis, the topline grew by 5.8% YoY during FY09, supported by growth in cement business. The cement segment reported a 17% YoY growth in sales led by 6% YoY growth in volumes. The operating profits were lower by 18% YoY as costs continued to grow at a double digit rate. 18% fall in operating profits and higher depreciation and finance charges led to a 24% YoY decline in profit before taxes. On a consolidated basis, topline growth stood at 8.4% YoY, while the net profits fell by 24% YoY. The company's subsidiary - UltraTech reported a 16% YoY growth in topline, while bottomline declined by 3% YoY. The board has recommended a dividend of Rs 30 per share. The same translates into a dividend yield of 1.3% at current levels. Cement stocks are trading higher currently.

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