FMCG, IT stocks lead the gains

Fri, 4 Jun Closing

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After a volatile session till about the first half of trade today, Indian markets moved up into the positive territory as the closing neared. Gains in stocks from the FMCG, IT, and banking sectors helped the gains in broader markets. On the BSE, one stock gained for every one that closed in the red.

The BSE Sensex and NSE Nifty closed with gains of around 95 points (0.5%) and 20 points (0.5%) respectively. Mid and small cap stocks followed suit. The BSE Midcap and BSE Smallcap indices closed up by 0.2% and 0.1% respectively.

Among other key Asian markets, Hong Kong and Japan closed in the read. Stocks across Europe have opened the day on a mixed note.

Software stocks closed mixed today. While gains were seen in Infosys, TCS, and HCL Tech, selling pressure marked trading in Tech Mahindra and Mphasis. Infosys today ruled out the acquisition of the European tech major Logica. The management has instead indicated that it is looking at smaller acquisitions, mainly in the BPO and IT consulting spaces, in countries like Germany and France. In terms of size, Infosys is looking at targets that have sales less than 10% of its own sales, or around US$ 500 m.

Infosys currently has around US$ 3 bn in cash. Given this, investors and industry analysts have been continuously behind the management to deploy some of it in making a large acquisition. However, the latter (Infosys’ management) has not buckled under so far. In fact, in August 2008, the company did make an attempt to buy SAP service provider Axon, but then withdrew its bid after domestic rival HCL Tech offered to pay more. Anyways, Infosys has not ruled out pursuing a large acquisition in the future. But the management has maintained that it is not something the company would aggressively chase.

Indian pharma stocks also closed a mixed bag today. Gains were seen in Cadila, Cipla, and Dishman. However, Glenmark, Ranbaxy, and Biocon recorded selling pressure. Sun Pharma, which yesterday rejected a US firm’s proposal to pick up its stake in the Israeli firm Taro, closed with marginal gains. As per reports, the company has rejected a proposal from US investor firm Guggenheim to acquire its 36% stake in Taro at double the price at Sun had paid in 2007. As informed by Sun’s management to the Guggenheim, it had rejected the offer as the company itself is looking to acquire control of Taro.

Two-wheeler auto stocks recorded selling pressure today. Key losers here included Bajaj Auto and Hero Honda. Stocks of passenger car companies like Maruti and Tata Motors however witnessed buying interest. As per a leading business daily, auto companies in India have lined up a mega investment of US$ 30 bn to be spent over the next four years. This includes spending not only by Indian firms like Maruti and M&M, but also be MNCs like Daimler and Volkswagen. This spending will help these companies ramp up their capacities to meet the surging demand for 2- and 4-wheelers by the rising Indian middle and upper classes.

As was earlier reported, car and motorcycle sales in India are already setting records. Car sales rose 25% last year. This was the fastest rate of growth in this segment in six years. Then, sales of motorcycles jumped 26%. The growth has been propelled by rising incomes, cheap lending by banks, and launch of new models. Things are really revving up for the Indian auto sector.