Closing bell 2nd June 2009

Closing bell 2nd June 2009

Buying at lower levels during the second half of today’s trading session led the markets to recover their losses and end the day on a flat note. The BSE-Sensex ended higher by around 30 points, while the NSE-Nifty closed lower by about 5 points. Stocks from the mid-cap and small-cap spaces ended the day on a positive note, recording gains of 0.8% and 0.9% respectively. Buying activity was witnessed in stocks from the metal, consumer durables and automobile spaces, while stocks from realty and power space led the pack of losers.

Other Asian markets ended the day on a mixed note. The European indices are currently trading mixed as well. Rupee was trading at 47.1 against the US dollar at the time of writing.

Two-wheeler stocks ended the day on a firm note led by Bajaj Auto and Hero Honda. Two-wheeler major, Bajaj Auto announced its sales volumes for the month of May 2009. The company reported an 8% YoY drop in overall motorcycle volumes as compared to the same period last year. In fact Bajaj Auto’s exports, which grew by nearly 25% YoY for FY09, witnessed a 3% YoY drop in volumes during the month of May. The overall decline in volumes is a surprising development if one compares it to Hero Honda’s 22% YoY growth in volumes for the month of May. A reason for such disparity may be due to the former’s focus on the already saturated urban areas.

Telecom stocks ended the day on a weak note led by Idea and Bharti Airtel. As per data released by the TRAI, the number of mobile subscribers in India crossed the 400 m mark during the month of April 2009. During the month, there were nearly 11.9 m additions. However, this figure is lower than the previous month’s figure of 15.6 m. While this may indicate a slowdown in mobile subscriber additions, it may be noted that March, being the last month of the fiscal, the telecom operators tend to become a bit aggressive on their marketing activities. In addition, the additions also seem to have slowed down on account of withdrawal of special plans and deals. As such, on whether the Indian telecom market is facing a slowdown can be actually witnessed in the coming months. It may be noted that the department of telecom has set a target of 500 m subscribers by 2010.

Improved production levels have raised India’s infrastructure sector output by 4.3% YoY for the month of April as compared to the same month last year. Growth in production levels in core sectors such as cement, finished steel, coal and electricity, was 2.7% in the same month last year and 5.9% in the year before. However, crude oil production remained in the negative as it fell by 3.1% YoY. Last year it recorded a growth of 1%. It may be noted that the infrastructure sector accounts for nearly 27% of India's industrial output.

The Indian markets continued to trade in the red on account of sustained selling activity witnessed during the previous two hours of trade. Currently, stocks from the cement, power and realty sectors are leading the pack of losers, while select stocks from the metal, software and auto sectors are trading firm. The overall advance to decline ratio is poised at 1.2 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading weak, down by around 130 points and 45 points respectively. However, the BSE-Midcap and BSE-Smallcap indices are trading higher by around 0.2% and 0.4% respectively. The rupee is trading at 47.17 to the dollar.

Pharma stocks are trading mixed. While Sun Pharma and Ranbaxy are trading lower, Lupin and Wockhardt are trading higher. Sun Pharma announced its FY09 results recently. Net sales grew by 27% YoY led by the domestic formulations and export bulk businesses during the fiscal. Operating margins contracted by 2.6% YoY to 43.6% on account of rise in staff costs and other expenditure (as percentage of sales). Net profits grew by 22% YoY, lower than the topline growth on account of the contraction in operating margins and higher depreciation charges and tax expenses during the fiscal. The Board recommended a dividend of Rs 13.75 per share for FY09. Sun Pharma and its subsidiary Caraco together have ANDAs (abbreviated new drug application) approvals for 71 products. It filed a total of 37 ANDAs in FY09. Thus, ANDAs representing 108 products are awaiting USFDA approval, including 7 tentative approvals.

Real Estate stocks are trading mixed. While DLF and HCC are trading lower, IVRCL Infra is trading higher. As per a leading business daily, promoters of DLF are planning to buy out DE Shaw’s stake in the group firm DLF Assets (DAL). D E Shaw had invested around US$ 400 m in DAL through convertible preference shares in 2007. It may be noted that DAL is a primary buyer of properties constructed by DLF. DE Shaw had a call option on the investments due in May, which has been exercised by it. The promoters sold around 9.9% stake in DLF in order to raise US$ 760 m to pay off DE Shaw and retire some debt. As per the reports, with the real estate markets reviving, DE Shaw may stay invested so as to avail higher valuations on its investments while on the other hand promoters are likely to pay back DE Shaw and buyout the stake.

The Indian markets slipped into the red during the previous two hours of trade as profit booking was witnessed at higher levels among the index heavyweights. Currently, stocks from the banking, power and energy sectors are leading the pack of losers, while select auto and software stocks are trading firm. The overall advance to decline ratio is poised at 1.1 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty are trading weak, down by around 110 points and 50 points respectively. The BSE-Midcap and BSE-Smallcap are also trading weak, lower by around 0.4% and 0.3% respectively. The rupee is trading at 47.17 to the dollar.

As per a leading business daily, Ashok Leyland plans to develop compressed natural gas (CNG) based heavy vehicles. It may be noted that the company has pioneered the use of CNG technology and it currently supplies CNG buses to various Indian cities. Fuel costs comprise a considerably higher portion of transportation costs as basic fuel prices like petrol and diesel have zoomed during the last decade. Further, the use of CNG fuel lowers fuel costs per kilometer as compared to diesel. Given the assurance of CNG fuel as Reliance’s KG basin has started to pump out natural gas, the supply of gas will not be an issue. The stock of Ashok Leyland is trading firm along with Tata Motors.

Banking stocks are trading weak led by HDFC Bank, Axis Bank and SBI. Axis Bank plans to raise Rs 30 bn through the issue of a debt instrument in the domestic and overseas markets. As such, the instrument would comprise Rs 5 bn of Tier I capital, while the rest will comprise of Tier II capital. The bank plans to utilise these funds for its future growth in the loan book and to expand its branch network. The bank plans to add 200 branches during FY10, which is considerably higher compared to 165 it added during FY09. It may be noted that during FY09 the bank’s advances grew by 37% YoY and capital adequacy ratio stood comfortably at 13.7%.