Indian markets short-circuited

Mon, 31 Jan 09:30 am

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Indian markets have opened deep in the negative today. The losses currently are largely due to selling in stocks from the power and engineering sectors. As for other key Asian markets, with the exception of China (up 1%), most have opened the week on a negative note. While Hong Kong is down 1%, Japan is weaker by 1.2%.

The BSE-Sensex is trading lower by around 265 points (1.4%), while the NSE-Nifty is down about 65 points (1.2%). Mid and small cap stocks are also trading weak, with the BSE Midcap and BSE Small cap indices down by 1.7% and 1.4% respectively. The rupee is trading at 45.95 to the US dollar.

Auto stocks have opened today on a weak note. TVS Motor and Ashok Leyland are leading the sellers' pack. India's largest passenger car manufacturer Maruti Suzuki revealed an interesting figure late last week. The company reported that repeat customers outnumbered its new buyers. As per a company representative, over the last four years, the first time buyer percentage has come down from 52% to 45% of the total volume sales of Maruti. This goes against the general view that first time buyers have been dominating the growth of the Indian car market (and that of Maruti) over the past few years. Now, for Maruti, this statistic can be looked at in both the positive and negative ways. Positive in the sense that existing customers like the company's cars so much that they are coming in as repeat buyers. The negative side is that the company has not been able to lure new buyers into buying its products. We believe the key reason for this second point is the intensifying competition in the already crowded Indian car industry. With new MNC manufacturers aggressively launching their models, it has gotten difficult for even an entrenched player like Maruti to sustain its incremental market share.

Energy stocks have also opened in the negative, with big losses seen in Chennai Petro and Castrol. India's largest oil & gas production and exploration company ONGC announced its 3QFY11 results last week. On a standalone basis, the company reported a 34% YoY growth in sales during the quarter. This growth came on the back of both higher volume sales and better realisations. While the company's crude oil output increased by around 7%, its gross realisation improved by 16% YoY. Further, ONGC's operating margins improved by 4.8% YoY as its net realisation per barrel improved by 12% YoY. This was despite a 21% YoY rise in the subsidies, and was largely aided by the strengthening of crude prices during the quarter. Subsequently, and also due to higher other income, ONGC's net profits surged by 132% YoY during the quarter. As for the nine-month period ended December 2010, while sale grew by 15% YoY, net profits were up 24% YoY.