Sensex surges into the positive zone

Fri, 4 Jun 01:30 pm

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The Indian markets rose above the dotted line during the post noon session as buying activity intensified in stocks from the FMCG and realty sectors. Gains were also seen in stocks forming part of the banking and IT spaces. However, engineering and metal stocks were amongst the top losers at the time of writing.

The BSE-Sensex is trading up by 70 points (0.3%), while NSE-Nifty is up by about 20 points (0.4%). Gains are also seen in stocks from the midcap and small spaces as the BSE-Midcap and BSE-Smallcap indices are trading higher by about 0.3% each. The rupee is trading at 46.64 to the US dollar.

Stocks of two-wheeler manufacturers are trading firm led by TVS Motor and Hero Honda. The stock of Hero Honda has risen sharply over the past few days. The key reason for the same is the strong sales numbers for the month of May 2010. Volumes grew by 14% YoY over the same month last year. The company sold a little less than 436,000 units during the month, being its highest ever monthly sales. Another reason for the gain in share price over the past few days has been the price increases of its vehicles. A leading business daily has reported that the company has increased prices of its vehicles by about Rs 500 to Rs 1,000 with immediate effect. The key reason for this has been the rising input costs. As per the company’s management, this is the first price hike since August 2008. Prices of the sporty vehicles such as Hunk and CBZ have been increased by Rs 1,000, while prices of other two-wheelers will be raised by Rs 500. However, prices of the company’s flagship products, such as Splendor and Karizma, will not be increased.

Considering that the company has been on a roll in terms of sales volumes, it would not have wanted to pass on the higher input costs to the customers completely. In addition, it may be noted that the company benefitted from the stimulus package that the government had announced last year in the form of lower duties. The company had not passed on these benefits to their customers, which eventually allowed the company to earn better margins.

IT stocks are trading are trading up with HCL and Infosys leading the pack. As per leading news daily, IT companies are facing a staff crunch in Europe. While companies like TCS and Infosys have announced grand hiring plans globally, the companies are finding it hard to recruit people for Europe. This is because of investment heavy processes as sourcing of right people at comparable wages is becoming a challenge. The companies are facing a problem of labor shortage as after the global economic crisis, fewer people were taking up the IT profession. Moreover, IT companies had a hiring freeze since the last two years. With the sector turning the corner, IT companies are facing high attrition and expectations from prospective employees. While the companies are expanding channels for sourcing people, it seems likely that IT companies will continue to face this problem for some time.