Buyers bouy the markets

Thu, 11 Feb 11:30 am

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The Indian markets continued to move upwards on account of sustained buying activity witnessed during the previous two hours of trade. Stocks from the banking, realty, IT, metal and consumer goods sectors are leading the pack of gainers.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 213 points and 67 points. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.9% each. The rupee is trading at 47.42 to the dollar.

According to a leading business daily, India’s third largest IT services exporter Wipro is scouting for acquisition in the telecom, healthcare, energy and utilities segments in order to strengthen its offerings in these verticals. It will be acquiring niche players having strong products offering so as to plug gaps in its portfolio.

The company is also acquiring land for setting up new campuses and has identified 4 Indian cities. However, the amount and timeframe of acquisition and expansion plans have not been disclosed. The company like its peers in the big IT league is ramping up employee count in India as well as abroad which will have an impact on its margins going forward. The wage inflation together with volatility in rupee will also exert pressure on operating margins. Nevertheless, an encouraging demand environment for IT services and products besides a comeback of discretionary spending will aid Wipro and other major IT players in going back to the high growth levels. However, we believe that the pre-recession growth rates of above 30% will take some time to reappear.

It is estimated that the Indian banks will not be able to achieve the even lowered credit growth target for FY10. According to a leading business daily, despite a pick-up in loans, bank credits grew only by around Rs 202 bn in the latter half of January 2010. This will require banks to lend as much as Rs 1900 bn in the next two months in order to meet the RBI's revised loan growth target of 16% for FY10. It may be noted that by the end of January 2010, the bank credits grew by around 9% since April, 2009. Though it appears that the industry as a whole will miss the target, the public sector banks expect to achieve their respective targets. We believe that the release of pent-up demand by the corporates will result in a significant pick up in credit growth in the short term. An improvement in economic environment aiding to revival in spending should bring cheers to bankers going forward.