IIP numbers drag Indian indices lower

Thu, 12 May Closing

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Despite higher-than-expected industrial production (IIP) numbers, the indices in the Indian stock market languished in the red throughout the session today. Concerns over the possibility of further monetary tightening dampened sentiments. The BSE-Sensex lost in the region of 249 points whereas NSE-Nifty closed lower by around 79 points (down 1.4%). The smaller indices also failed to sustain investor interest with the BSE Midcap and BSE Small cap indices both ending lower by 1%. Commodity stocks Sterlite Industries and Hindalco led the declines.

Major other Asian indices also closed the day on a negative note. Europe is currently trading flat to negative. The rupee was seen trading at Rs 44.99 to the dollar at the time of writing.

Asian Paints announced results for the March quarter and fiscal ended 2011. The net sales increased by 4.7% YoY in 4QFY11. The growth was led by price increases in the decorative segment amidst rising input cost. It may be noted that the company undertook five price increases during the year. The cumulative price increase in the decorative segment was in the region of 12% during the year. However, the bottom line declined 3.4% YoY due to increase in depreciation expenses and fall in other income.

The company's management stated that the demand conditions in the decorative segment continue to remain robust. However, the overall demand environment in the industrial paint segment remains challenging. In order to accelerate the growth in industrial paints segment the company entered into a second JV with PPG Industries Inc (PPG). Even the international operations of the company suffered a setback due to global slowdown and unrest in Egypt. Except for South Asia both Caribbean and Middle East regions reported declining revenue growth.

Mahindra & Mahindra (M&M), one of India's leading auto makers recently launched its Maxximo mini-van in Andhra Pradesh. The passenger carrier is priced at Rs. 0.32 m in the southern state. The eight-seater mini-van will be available across the country by this month-end. With this launch, M&M hopes to capture sizeable market share in the mini-van segment in the country. The existing market size is at 150,000 vehicles. M&M presently has the production capacity of 2,000 to 2,500 mini vans per month and can ramp up the same. The product will compete with Tata Magic and Maruti Omni in the mini-van segment. Targeted at semi-urban and rural areas, the vehicle will be available through 230 dealers and 600 outlets across the country. While in the past fiscal, M&M was able to offset the impact of rising input costs through various methods, it is expected that going forward commodity prices will play a key role in determining profitability.