Sensex the only gainer in Asia

Thu, 30 May Closing

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Thanks to a spurt during the closing hours, indices in the Indian stock market closed above the dotted line in today's trading session. While Sensex today edged higher by around 68 points (up 0.34%), gains on the NSE-Nifty were seen at around 20 points. BSE Mid Cap and BSE Small Cap indices however closed mostly flat today. Advance to decline ratio on the Sensex was pretty evenly split with there being one gainer for every stock that closed lower.

While all major Asian indices closed lower today, Europe is witnessing mixed trend currently. The rupee was trading Rs 56.2 to the dollar at the time of writing.

Another day, another round of gains but the trend is pretty much the same we believe. Cheap liquidity on account of quantitative easing and low interest rates seem to be driving the interest in most risk assets, Indian equities included. However, concerns are growing that US Fed might finally start slowing down the pace of asset purchases thus sucking liquidity out of the system. However, as pointed out many times before, this should not scare investors in those Indian companies that are fundamentally strong and are focused mostly on the domestic story.

Tata Motors, India's largest CV manufacturer was amongst the top gainer today, ending higher by 4%. The optimism was on account of the company's better than expected set of numbers for the quarter and full year ended March 2013. On a standalone basis, while revenues for FY13 fell by 18% YoY, net profits plunged 76% YoY on account of a weak macro-economic environment and competitive pressures. In terms of segments, the MHCV business witnessed a tepid growth of 1% YoY for the year. In this, the medium and heavy commercials performed poorly on account of slowdown in economic growth, sluggish infrastructure spending and higher operating costs for transport operators. The light commercial vehicles did reasonably better and helped prop up overall growth in the MHCV space. Volumes of the company's passenger vehicles tumbled by 31% YoY. Weak sentiments and high cost of ownership led to a decline in demand for the company's passenger cars. However, the SUV segment put up a strong show and was supported by new launches. Jaguar Land Rover (JLR) displayed mixed results for the year. Sales for JLR were up by 17% YoY for the full year, while profits fell by 18% YoY. The latter was adversely impacted by higher depreciation and amortization charges as well as exchange revaluation. Growth in sales was bolstered by strong demand, new product launches and growth in China.

Amongst the leading losers in the Sensex was also a Tata group company, Tata Steel which lost to the tune of around 4% today. The company's woes look in no mood to ease up as after a poor financial performance, it is the bond risk that has come to haunt the company now. As per a leading daily, the company's bond risk is rising from a 20-month low as losses in its European operations eat into its ability to repay debt of as much as US$ 5 bn due by the end of 2015. What more, with demand in Europe showing no signs of improving and the company undergoing significant capex at its Indian operations, the pressure on cash flows is unlikely to ease any time soon.