India benefits from strong Asia

Wed, 20 Apr Closing

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Indian stock market gained further ground during the closing stages and as a consequence, ended the day strongly in the positive. The BSE-Sensex edged higher by about 350 points whereas the NSE-Nifty logged in gains to the tune of 110 points (up 1.9%). Gains were also seen in BSE Midcap and BSE Small cap indices, both of which closed higher by more than 1% each today. Advance to decline ratio stood firmly in favour of the former with almost all the stocks on the Sensex, save a couple, ending in the green.

Most Asian indices also closed the day in the positive with stocks from Europe also witnessing a positive trend currently. Rupee was seen trading at Rs 44.4 to the dollar at the time of writing.

Today's gains had more to do with global factors than local we believe. Investors bought into Asian stocks, including India, on the back of positive economic news emanating from the US and the expectation that the world's largest economy is indeed recovering. What also helped was the lower demand for US treasuries as they went lower, snapping a three day winning streak. With investors looking in risk taking mode, looks like the rally might have some legs in the short term. Valuations though aren't compelling in India right now and hence, we advise investors to be quite selective in their approach.

Auto stocks closed mostly strong today with Hero Honda being the sole loser amongst major sector companies. There is no doubt in anyone's mind that the auto industry has had a stellar past couple of years. After witnessing a bit of a slowdown in the second half of FY09, industry fortunes picked up in FY10 and there has been no looking back since then. Infact, the fiscal FY11 was a record year for industry in terms of volumes with sales of certain segments like passenger cars growing as much as 30%. However, with interest rates going up in recent months, there were apprehensions that brakes on growth could well be slammed and slammed hard at that. It seems the apprehensions may have to wait a bit. This stems from the fact that Indian government has forecasted for a normal monsoon for the coming season. If that is indeed the case then sales could yet again receive a boost on the back of growing farm income. Thus, it turns out that calling the slowdown in the auto industry may not be the most prudent decision just yet.

PFC, one of India's leading power sector financiers witnessed selling pressure today and closed around 4% lower. The weakness seemed a result of the muted set of numbers posted by the company during the year ended FY11. The company's net profit for the quarter increased only marginally. Its total income however registered a growth of 24%. This performance restricted the full year net profit growth to 11% and the growth in total income to 26%. Full details of the results though are still awaited.