Heavy(weight) punch!

Markets consolidated gains in the final hour of trade today as heightened activity was seen among the index heavyweights. Buying in key stocks from the auto, banking, commodity, software and pharma sectors also aided the northward movement. The benchmark indices closed with near 1% gains each.

The BSE Sensex closed at 6,465 (up 67 points) and the Nifty closed at 2,027 (up 19 points). The rupee was trading at Rs 43.72 per US Dollar.

After last few day's beating, optimism finally 'strolled' into the markets as both the benchmark indices closed with nearly 1% gains each. These gains were seemingly fueled by newspaper reports that monsoons for the current year are expected to set in early and are likely to be above normal. It must be noted that two thirds of the Indian populace is dependent on agriculture as their earning resource. Thus, this news is a positive, as this could substantially improve the disposable incomes in the hand of rural India. From the perspective of the auto sector, two wheelers in particular, this is encouraging as there is a vast untapped rural market, which can be exploited. It should be noted that the two-wheeler segment is facing severe competition and pricing pressure, hence any growth that can be perceived is only through volume growth.

After yesterday's beating, stocks from the software closed today on a strong note. Major gainers here included MphasiS (6%), Satyam (2%) and TCS (1%). Strong buying in the mid-size player, MphasiS was seemingly a follow-up of the company's announcement of a 1:1 bonus while it reported its http://www.equitymaster.com/detail.asp?date=4/12/2005&story=1 FY05 results late yesterday. For FY05, while the topline growth at 32% YoY has been commensurate with what the management had earlier projected, the growth in profits at 26% YoY has seen a significant underperformance. What's more, the operating margins of the company have declined by 150 basis points on account of a disproportionate rise on the expenditure front. But for the tax write-back, the profit growth would have been lower. The management of the company has projected revenues and profits to grow by 25% and 30% respectively in FY06. The board has recommended a final dividend of Rs 3 per share.

Stocks from the shipping sector were among the key gainers today. Leading the pack were Bharati Shipyard (5%), SCI (1%) and Varun Shipping (1%). The optimism towards the Bharti Shipyard stock seemingly stemmed from the reports in a leading business daily that the capacity of the Indian shipbuilding industry is entirely booked for the next 4 years. The reasons being attributed to this are developments like mandatory phasing out of old tankers as per the norms laid out by the International Maritime Organisation (IMO), collapse of European shipyards and the cost competitiveness of Asian companies. With the recent development that nearly 2% of the worlds total tonnage capacity (about 100 ships) had to be discarded as per IMO norms, a huge demand for shipbuilding has cropped up.

Auto stocks had a mixed day today with major gainers being Ashok Leyland (ASOK.BO, news) , Maruti and Bajaj Auto (BJAT.BO, news) (each 1% up). On the other hand, LML (2%) and TVS Motor (1%) led the losers' pack. Passenger car and commercial vehicle (CV) major, Tata Motors, managed to close marginally in the positive. Earlier, some business dailies had reported that the company has struck a deal with SREI Infrastructure Finance and its associate company, Indian Infrastructure Equipment Ltd. for 10,000 Tata vehicles. As per the details of the deal, the vehicles would be procured through a straight sale transaction between Tata Motors and SREI and subsequently would be leased to prospective users by SREI. Product support would be the onus of SREI backed possibly by an annual maintenance agreement with Tata Motors. At Rs 700,000-800,000 per vehicle, the total value of the deal comes to around Rs 7-8 bn. The management of Tata Motors has indicated that this method of operating lease would be an avenue of business in the future and the company would be open to doing business with any finance company that operates in this business.

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