India: Markets Continue Downward

by: Equitymaster

Markets continued their downward journey on account of persistent selling across the index heavyweights. Currently only one stock on the Sensex is trading in the green. The software and energy stocks are among the worst hit. The decline to advance ratio is poised at 8.4 to 1 on the BSE.

The BSE Sensex and NSE Nifty are trading lower currently, lower by almost 740 points and 225 points respectively. The BSE Midcap and Smallcap indices are trading lower by 5.5% and 6% respectively. The rupee is trading at 48.81 to the dollar.

Inflation (based on the wholesale-price-index) has declined to 11.44% for the week ended on October 4 as against 11.8% a week ago. This decline can mainly be attributed to the cooling of commodity prices especially crude oil.

Earlier in August this year, the inflation rate had moved up to the level of 12.91%, the highest reading since annual numbers in the current data series became available in April 1995. Inflation jumped to this level after a hike in government-controlled retail fuel prices in June.

Though it seems that the inflation rate has peaked and may embark on a downtrend, it is still above the RBI's comfort level.The central bank is targeting to bring down the inflation level to single digits by early next year.

HCL Technologies announced its 1QFY09 result yesterday. The company's topline grew by 9% QoQ, largely on account of higher volumes and growth in its IT services business. The company's core software business (73% share of revenues) grew by 8% QoQ, while infrastructure services (16% of revenues) grew by 13% QoQ and its BPO services (11% of revenues) grew by 10% QoQ. The company's operating margins dropped by 1% on a QoQ basis on the back of contraction in margins of its BPO segment. The company's net profits grew by 3% excluding the forex losses. Amidst financial crisis the management has indicated they are cautious about current scenario. The stock of HCL Technologies is trading 8% lower, while Infosys is down 9%.