Benchmarks pare some more gains but stay afloat in the green

Key benchmark indices though have pared some more gains but are still trading in the green amid alternate bouts of buying and selling in blue chip stocks. Positive cues from the global equity markets are providing support to the markets. The Asian markets are trading mostly in the green and the US index futures are also showing an up-tick in screen trade at this point of time. Back home on the sectoral front, banking, Public Sector Undertakings and Fast Moving Consumer Goods stocks have garnered the maximum interest of the investors, while stocks from realty and Information Technology sectors were at the receiving end. Though the top two index heavyweights - RIL and Infosys are trading in the red, not letting the markets to move forward; other heavyweights such as ICICI Bank, L&T, ITC, HDFC Bank and SBI are helping the markets put a ceiling on the decline. Meanwhile, broader indices which were see-sawing earlier in the day are now trading on the periphery as BSE Mid-cap index edged lower loosing around 0.11%, while BSE Small-cap index gained around 0.05%.

The market breadth on the BSE turned negative again; the losers thrashed the gainers in a ratio of 1339:1288 while 117 shares remained unchanged.

The BSE Sensex advanced 78.92 points or 0.41% at 19,303.04. The index touched a high and a low of 19,431.56 and 19,198.14, respectively.

The BSE Mid-cap index lost 0.11%, while BSE Small-cap index gained 0.05%.

The top gainers on the BSE sectoral indices were Bankex up 1.52%, Public Sector Undertaking (PSU) up 1.05%, Fast Moving Consumer Goods (FMCG) up 0.82%, Power up 0.74% and Metal was up 0.74%.

On the flip side, Realty down 1.67%, Information Technology (IT) down 1.56% and TECk down 1.08%, were the only losers in the BSE sectoral indices.

Meanwhile, India's import sensitive commodities has increased by 14.1% over the first seven months of the current fiscal. Total import of sensitive items for the April-October 2010 has been recorded at Rs 40,499 crore as compared to Rs 35,487 crore during the corresponding period of last year. The gross import of all commodities during the same period of current year stood at Rs 889,827 crore as compared to Rs 743,469 crore during the same period of last year. Thus, the share of sensitive items in total imports increased slightly to 4.8% this year compared with 4.6% a year ago.

Imports of pulses, fruits and vegetables, cotton & silk, spices and tea & coffee have all declined at broad group level during the period. On the other hand, import of items like vegetable oils, automobiles and auto parts, rubber, products of SSI, milk & milk products, marble & granite, alcoholic beverages and food grains have increased during the period under reference, said a press release of government.

Further, within the edible oil space, import has increased from Rs 14,205 crore last year to Rs 15,882 crore this year. A significant feature of edible oil import is that import of crude oils has gone up by 17.2% and that of refined oils have gone down by 16.0%. While the increase in quantity of edible oils imports reflect nearly 50% import dependence of the country to meet domestic demand, the changing pattern of import reflect that capacity utilization at domestic solvent extractors had improved.

The top gainers on the Sensex were RCom up 3.22%, Hindalco Inds up 3.21%, Bajaj Auto up 2.83%, SBI up 2.32% and BHEL up 2.18%.

Infosys down 2.25%, DLF down 1.08%, TCS down 1.02%, Tata Motors down 0.74% and Cipla down 0.43%, were the top losers on the index.

India's information technology industry is expected to show strong performance in the December quarter.The results of big players are expected to show strong volume growth owing to continued improvement in global economy and increasing demand for IT services as the recovery becomes more sustainable over time.

Analysts opine that, in terms of US dollar, revenues of the 4-5 biggest companies will expand in the range of 5-7% on sequential basis, which is rather impressive in the backdrop of a seasonally soft quarter. The growth will come on top of a strong volume growth seen in previous quarter when both TCS and Infosys surprised the markets on upside. However, in rupee terms the expansion will be significantly modest due to over 3% appreciation of Indian currency against dollar.

Some upward bias in the dollar growth will also be there on account of favourable cross-currency movements. The US currency depreciated against other major currencies in the Oct-Dec 2010 period. It went down 1.9% against the UK pound, 5.1% against the Euro and 9.1% against the Australian dollar. This will result in greater dollar earnings for IT companies against payments made in these currencies.

The performance of mid cap companies will however be much more mixed. Companies with significant export share will manage to show reasonable volume growth, but most will be behind the top league. In rupee terms growth is likely to be much lower here as well. If this indeed is the case, it would be repeat of last quarter when mid caps were significantly behind industry leaders in volume growth. Industry insiders expect the trend to continue for some more quarters in that big companies will remain ahead of the rest in terms of growth. 

With regard to margins, all the players are set to face difficulties. Rising costs of operations and higher attrition rates would squeeze margins for both large and small players. Top league players may face a decline in EBITDA margins by 30-40 basis points on account of higher costs. Things could be worse for mid-sized companies where the attrition was highest over the last quarter. Analysts estimate that attrition levels in smaller companies were around 25-30 %, as compared to 14-17 % for the larger companies.

The S&P CNX Nifty added 32.85 points or 0.57% to 5795.70. The index touched a high and a low of 5822.80 and 5754.90, respectively. 

The top gainers on the Nifty were Hindalco Inds up 3.76%, RCom up 3.22%, HCL Tech up 3.09%, Bajaj Auto up 3.03% and Sesa Goa up 3%.

The top losers on the index were Infosys down 2.29%, SAIL down 1.61%, TCS down 1.16%, DLF down 0.75% and Tata Motors down 0.74%.

Other Asian markets were trading mostly in the green at this point of time. Shanghai Composite gained 0.47%, Hang Seng surged 1.31%, Straits Times rose 0.49%, Seoul Composite soared 0.36% and Taiwan Weighted added 1.29%.

On the flip side, Jakarta Composite declined 0.86%, KLSE Composite slipped 0.15% and Nikkei 225 decreased 0.29%.

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