Selling intensifies in later hours

Wed, 22 Dec Closing

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   Pre-Open   

   09:30 am   

   11:30 am   

   01:30 pm   

Indian indices opened on a cautious note and barely managed to stay afloat for the larger part of today’s trading session. However, in the final hours selling activity at higher levels took its toll and the indices were pushed below the dotted line to close into the red. While the BSE-Sensex closed lower by around 45 points (down 0.2%), the NSE-Nifty lost around 16 points (down 0.3%). The BSE Midcap and the BSE Smallcap managed to buck the trend and closed higher by 0.1% and 0.4% respectively. Barring FMCG and metals stocks, most stocks across sectors closed weak.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 45.07 to the dollar at the time of writing.

Engineering stocks closed mixed today. While ABB, Voltas and BHEL found favour, L&T and Suzlon were at the receiving end. As per a leading business daily, BHEL is contemplating a tie-up with Japanese auto company Toyota for manufacturing electric vehicles (EVs) in India. The rationale for Toyota approaching BHEL is the latter’s experience since BHEL had previously manufactured electric buses, and produces heavy electric equipment such as electric locomotives. The partnership envisages either setting up a joint venture company or simply a technical tie-up. Electric vehicles are gaining prominence especially due to rising costs of fuel and pollution concerns. But there are also issues in the form of high costs, low range and lack of infrastructure. And so whether such a tie-up with Toyota is beneficial to BHEL remains to be seen.

As per a leading business daily, auto major Maruti expects sales in FY11 to grow by an impressive 31% YoY. This primarily on the back of surge in demand in the domestic market. This is encouraging given that the company has been facing severe competition in recent times from the likes of Hyundai and Ford as well as domestic rivals. It must be noted that in 1HFY11, Maruti saw a 26% YoY growth in sales led by strong volume growth especially in the domestic market. The company had, however, faced pressure on the operating margin front. The auto industry has been facing cost pressures in terms of commodity prices. Thus, passing on these prices to customers will not be an easy task considering that competition has increased significantly. Further, while demand for vehicles has been buoyant, growth rates would eventually slow down given the high base effect witnessed by the industry and the company last year. The stock closed lower today.

Meanwhile, RBI deputy governor Mr. Subir Gokarn has stated that the headline inflation is not easing as fast as the RBI would like it to and that the upside risk remains. It must be noted that the central bank had left rates unchanged this quarter but could resume its tightening measures if there is not much improvement in terms of inflation easing off. What is more, although consumer prices have eased a bit in the last three months, they are still on the higher side.