The optimism that was witnessed on the bourses throughout the day's session continued in the final trading hour as well with the benchmark indices closing well above the dotted line. While the BSE Sensex ended the day up around 145 points (1%), NSE Nifty edged higher by around 44 points (1%). The BSE Midcap and Smallcap indices also registered strong gains of around 0.7% and 1% respectively. The advance to decline ratio was overwhelmingly in favor of the former in the ratio of 4:1 on the BSE Sensex.
While the Asian indices closed mixed today, the European indices are trading in the positive currently. The rupee was trading at 48.03 to the dollar at the time of writing.
With sugar prices going through the roof, biscuit manufacturers are having a tough time. While Britannia which derives 80% of its sales from biscuits managed to hold on to its margins in 1QFY10 through changes in product mix, the smaller players have not been as lucky. The Indian Biscuits Manufacturer's Association (IBMA) has appealed to the government to bring down the prices of wheat, sugar, edible oil and milk powder — the key ingredients for biscuit manufacturing. It may be noted that the biscuit industry is worth Rs 60 bn and 50% of the market belongs to small scale industries. Further, the industry being labour-intensive, the poor margins have led to significant job losses. The stock of Britannia has lost 18% gains over the past two months.
Dell, which is the world's second-largest maker of personal computers, is set to acquire Perot Systems in a US$ 3.9 bn deal. Perot Systems specialises in IT support for hospitals, government departments and banks. What may be of interest to Indian investors is the fact that nearly one-third of Perot's workforce of 23,000 is based in India. Thus the Dell-Perot merger would make the entity a force to reckon with in the Indian market, especially in system integration deals.
We believe that the merger will serve a blow to Indian IT majors like TCS and Infosys (INFY) who were looking to tap emerging opportunities in the US healthcare and government sectors, with revenue from the BFSI vertical showing little potential of reviving.
As per a business daily, with the equity markets scaling up over the past few months, the broking industry, which had fired people in droves and cut down offices during the market meltdown, has started hiring in large numbers. In fact the newspaper has quoted the HR executives of leading brokerage houses laying out plans of recruiting to the extent of 800-1,000 people every month, largely in the sales team, selling third-party products, loans etc, of which 50% are for the equity business and the rest for commodities and currency broking businesses. The stocks of broking companies like India Infoline, Motilal OswalEdelweiss Capital and have up by 20% to 30% over the past two months.
We believe that given the cyclicality of the broking business, such adhoc hiring plans can continue to affect the margins of these companies over the longer run.
The biggest banks in India, including SBI and ICICI Bank will now have more competition from unforeseen quarters. This is because post offices are set to adopt Core Banking System (CBS) by the end of FY10 to add the technological edge to their banking (deposit collection) services. To put things in perspective, at present the Indian Post Office has 15 m branches with deposits to the tune of Rs 5.6 trillion. Keeping this in mind, the SBI as well as private banks like ICICI, Axis and IDBI Bank have approached the department for tie ups for some of their services in rural areas.
