Friday 9th October, 2009
(Closing)
Although further attempts at profit booking were thwarted, sharp selling in the afternoon session led to the indices ending the day and the week significantly below the dotted line. BSE Sensex closed the day nearly 200 points lower (down 1.2%), while Nifty edged lower by nearly 60 points (down 1.1%). Even the BSE Mid cap and Small cap indices could not avoid a coat of red and closed lower by 0.7% each. The advance to decline ratio on Sensex was heavily in favor of declines with only one stock advancing for every 5 that declined.
Among Asian indices, while most of them again managed to close in the positive, European markets are trading rather mixed currently. As for the rupee dollar rate, rupee was poised at Rs 46.6 to the dollar at the time of writing.
Something has changed. The near term fundamentals of a couple of sectors may be. And this is leading to volatility in the markets. Stretched valuations in quite a few cases are not helping matters either. Talking of changed fundamentals, two sectors that come to mind are telecom and IT. In the case of former, it is the price war that has erupted suddenly that has taken the investing community by surprise. While it will be difficult to assess the longer term implications of the same right now, investors seem to be convinced that near term, profitability of telecom sector companies is under threat. Moving to IT, it is the sudden rise in rupee that has everyone on tenterhooks. Infact, Infosys, the IT bellwether even went to the extent of labeling rupee appreciation as one of its major concerns. Thus, with two of the major sectors facing near term concerns, pressure on the markets is understandable. Only strong news in the opposite direction or a torrent of liquidity could take the markets higher. Could the driver of both be the second quarter results? Let us wait and watch.
Indian steel makers seem to have hit their own little purple patch. Close on the heels of Tata Steel announcing strong volume numbers for the quarter as well as first half ended September 2009, rival SAIL has also put up an encouraging performance. As per reports, the company's volumes for the September quarter have recorded a handsome growth of 14% YoY. And just as in the case of Tata Steel, long-products have been one of the key drivers of the same, thanks largely to the robust construction activity in the country. SAIL, India's largest public sector steel undertaking is on a capacity expansion drive whereby it is looking to increase its capacity nearly two-fold over the next few years. And the company seems to have learnt its lessons rather well. As opposed to primarily debt, the funding for the expansion this time around could involve a fair mix of both, equity as well as debt. The stock ended marginally lower on the bourses today.
A couple of hotel stocks had a field day today. Infact, EIH, one of India's leading chain of hotels edged higher by as much as 13%. The optimism seemed to be a result of a story in a leading daily that the hotel sector stocks have not participated in the recent rally in a big way and with the fundamentals also on an upswing, investor interest should return in these companies. Besides, valuations are also looking a lot better as compared to the peak of the markets. Furthermore, also from a long term perspective, the growth prospects look good as India faces a huge shortage of hotel rooms and with economic prospects bound to remain strong, hotel sector companies could witness strong cash flows in years to come.
