Markets stage a comeback

Sat, 13 Feb RoundUp

   Previous Close   

After witnessing a decline for over three previous weeks, global markets ended this week on a positive note. The Asian markets were amongst the top gainers. While concerns over some European nations defaulting on their debt repayments were on investors' minds, certain developments did manage to overpower the concerns.

The key reason for the bounce back this week was the optimism of a global economic recovery. In addition, the fact that stocks seemed cheaper (on the back of the sell off witnessed over the past few weeks), also played a role in their rise this week. India's benchmark index, BSE-Sensex ended higher by about 3%.

Moving on to other key global markets, Brazil was the top gainer this week with its benchmark index ending higher by about 5%. Asian markets such as Hong Kong, Singapore and China followed suit, ending the week higher by about 3%. US and Japan were amongst the lowest gainers this week.

Source: Yahoo Finance

Coming back to Indian markets, gains were seen across sectors. The list was led by IT, realty and consumer durables stocks. While the BSE-IT index ended higher by about 5%, the BSE-Realty and BSE-Consumer Durables indices ended higher by about 4% and 3% respectively. Stocks from the smallcap and midcap spaces were also in demand this week, with the BSE-Smallcap and BSE-Midcap indices ending higher by about 3% each. Pharma and power stocks were amongst the lowest gainers this week.

Source: BSE

Moving on to the key corporate developments this week – During the week, the Society of Indian Automobile Manufacturers (SIAM) reported that India's car makers witnessed their highest ever monthly domestic auto sales during the month of January 2010. The sales volumes show an increase of a strong 32% YoY. Volumes during the month stood at 145,000 units as compared to the previous high of about 130,000 units.

Auto major Maruti Suzuki recorded a robust 33% YoY increase in sales volumes in the month of January 2010. The company's domestic sales rose 21% YoY during the month to 81,000 vehicles, while its exports rose an impressive 300% to more than 14,500 vehicles. This brought its total sales number to 95,650. Interestingly, this is its best ever sales performance in a single month as well. As per the company's management, plant de-bottlenecking has helped in higher supplies leading to improved volumes. Also, some of the company's newly launched models have been doing particularly well. Further, the company expects the fourth quarter of FY10 to be as good as the third quarter. However, at the same time, the company is also concerned about the rising input costs. It believes that it would be difficult for it to record a similar growth figures as to what it has witnessed over the past year. In addition, the fact that interest rates would eventually rise would not help matters as well.

Speaking of rising input costs, a leading business daily has reported that steel prices are likely to rise by about 5% to 8% from the month of April. However, this is likely to be the case for long-term contracts (a month when the steel manufacturers enter into supply contracts with customers). The reason for the same is the rising costs of coking coal and iron ore, which are the key raw materials used in steel production. The industry is expecting a 10% to 15% rise in costs of coking coal over the next few months.

The buoyancy witnessed in IT stocks during the week was on the back of various reasons. The key being the industry experts' view that the worst seems to be over for the sector. Over the past few quarters, the sector has been seeing improving volumes coupled with stable pricing. Plus, during the week, the management of Infosys indicated that it is seeing a return in discretionary spending by clients. This indicates a recovery in the business sentiment for IT offshoring. However, at the same time, the company is also seeing protectionism in some economies as one of the key concerns that can elongate the recovery process.

Movers and shakers during the week

Company	5-Feb-10	11-Feb-10	Change	52-wk High/Low
Top gainers during the week (BSE-A Group)
GSK Consumer	1,289	1437	11.5%	1,510 / 589
Lanco Infratech	45	49	10.8%	61 / 11
Fortis Healthcare	143	152	6.6%	160 / 63
Central Bank	149	159	6.5%	179 / 30
Bajaj Auto	1,681	1,788	6.4%	1,836 / 455
Top losers during the week (BSE-A Group)
Gujarat NRE Coke	76	70	-8.3%	98 / 17
Tata Steel	577	534	-7.5%	662 / 150
Welspun Gujarat Stahl	259	239	-7.5%	296 / 50
Jai Corp.	285	266	-6.5%	350 / 70
Dr. Reddy's	1,162	1,087	-6.5%	1,256 / 372

Source: Equitymaster
IIP figures for the month of December were announced recently. The industry registered a strong growth of 16.8% during the month. This figure is well above the market expectations and has risen hopes of the Indian GDP growth crossing the estimated figure of 7.2% this fiscal (FY10). There are two key reasons for the IIP figure to clock such a growth – the low base of last year, and the impact of the government's stimulus packages. It may be noted that during the same month last year, the IIP growth figure stood at a negative 0.25%. On a month on month basis i.e., as compared to November 2009, the IIP growth stood at an impressive 10.9 %.

While manufacturing production rose by about 18.5% in December from (as compared to a decline of 0.6% last year), 'mining' and 'electricity' were up by 9.5% (2.2% last year) and 5.4% (1.6%) last year) respectively. Industrial growth for 9mFY10 stands at about 8.6%. this is way higher as compared to the corresponding figure of 3.6% last year.