Friday 23rd October, 2009
Breaking a three day jinx, the benchmark indices closed in the positive today but the gain turned out to be a marginal one. While Sensex edged higher by nearly 20 points today, Nifty managed to close with gains of around 10 points. BSE Mid cap and Small cap indices also ended in the green, managing gains of 1% and 0.3% respectively. The breadth amongst Sensex stocks remained in favour of advances as nearly 6 stocks gained for every 4 that declined. Among sectors, tech was the clear winner with all the three top players viz. TCS, Infosys and Wipro recording robust gains.
While Asia closed strong today, buying activity is also being witnessed across Europe currently. The rupee was trading at Rs 46.5 to the dollar at the time of writing.
Although India closed higher today, its continued underperformance with respect to the other Asian markets seems a little baffling. It has to be remembered that a similar fate lay in store for the Chinese markets earlier this year when concerns of a bubble being formed there forced investors to pull money out of the Chinese markets. Now, with that fear being put to rest by the Chinese authorities, perhaps the Chinese markets are attracting more investments and some of it is going out of India as well.
The fact that the Indian markets are not looking attractive from a near term perspective is not helping matters either. However, we believe that any deeper correction of such sort may not be a bad thing for a long-term investor as he would then get a chance to enter at a relatively cheaper level and gain that much more from the long-term India growth story.
ITC, the cigarettes to hotels conglomerate emerged the strongest on the Nifty today, ending higher by 5%. The buoyancy could be a result of the company's good show during the September quarter. Riding on the back of a robust 21% growth in its cigarettes business, the company logged in a topline growth in the region of 13% during the quarter on a YoY basis. Even more impressive was the margin expansion of the company where it managed to expand operating margin by 5% and hence grow its operating profits by a much higher 31% and its net profits by 26% YoY. The company's hotel business continued to disappoint as revenues fell 24% YoY. Besides cigarettes, the agri business also performed well, growing its revenues by 19% YoY.
Steel major Tata Steel continued to trade weak as it lost another 2% on the bourses today. While we see no major reason for weakness in the country, it could be put down to profit booking as the stock has gained handsomely since the start of the current bull run. In fact, investors have started wondering whether the stock has run ahead of its fundamentals. After all, Corus, its overseas subsidiary is showing little signs of revival and its Indian operations may also start facing the heat once RBI starts tightening monetary policy. Having said that, its stellar track record and integrated domestic operations makes it a good long term play.