Strong selling takes Sensex lower

Mon, 3 May 01:30 pm

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Strong selling activity led the Indian indices to drop further into the red during the previous hour of trade. The overall market breadth seems pessimistic as the decline to advance ratio is poised at 1.4 to 1 on the BSE. Selling activity is seen in stocks across the sectors led by metal, capital goods and power stocks. IT stocks are also seeing some pressure. Stocks from the healthcare and auto spaces are amongst the lowest losers.

BSE-Sensex is trading lower by 160 points while the NSE-Nifty is down by about 35 points. Pressure is also being seen in stocks from the mid and smallcap spaces as the BSE-Midcap Index and the BSE-Smallcap indices are trading lower by 0.4% and 0.2% respectively. The rupee is trading at 44.6 to the US dollar.

Auto stocks are trading mixed with Bajaj Auto and Ashok Leyland trading firm, while Tata Motors and Eicher Motors are trading weak. Maruti Suzuki announced its sales numbers for the month of April 2010 recently. The total sales volumes stood over 93,000 units. The same figure last year stood at about 71,450 units translating to a 30% YoY increase. The increase in volumes largely came from the company’s C segment (11% of total sales volumes), A2 (60% of total sales volumes) and A3 segment (11% of total sales volumes), which saw a volume increase of 38% YoY, 21% YoY and 41% YoY respectively. Exports grew at a strong pace of 89% YoY and contributed to about 14% of total volumes. During April 2009, export sales formed about 9.5% of total sales volumes. Domestic sales volumes grew at a pace of 23% YoY during the month.

Considering that the company’s closest rival Hyundai Motor India’s total sales volumes grew at a pace of 17% YoY, this definitely is a good performance by Maruti. The general belief is that customers do not seem to be really worried about the hike in prices of vehicles. However, it is quite possible that the industry will not be able to sustain a very high increase in sales volumes if the input prices move upwards.

IT stocks are currently trading mixed with Infosys and HCL Technologies trading weak while Wipro and Tech Mahindra are trading firm. Tech Mahindra announced its fourth quarter and full year results recently. The company reported a marginal drop in revenues during the quarter (on a sequential basis) during 4QFY10. This was mainly on the back of reduced volumes in its ‘Telecom Service Provider (TSP)’ segment. Operating margins during the quartet remained flat at 23.6%. However at the bottomline level, the company was able to grow its profits by 31% QoQ. This was mainly due to higher other income. In addition, lower interest costs aided the bottomline growth. As for the full year numbers, sales improved by about 4% YoY. This was mainly due to improved volumes across all segments. Profits however dropped by 31% YoY on the back of a poor operating performance. The company’s operating margins declined by 4.2% YoY on the back of higher operating expenses and rupee’s appreciation against the US dollar. Plus, a very large increase in interest costs brought down the bottomline of the company. The debt taken on its books were mainly for the acquisition of Satyam