Indian Markets Friday: Telecom Stocks Cap the Losses

Although not managing to move into the positive territory, the benchmark indices recovered some of the early losses on the back of gains in the heavyweights in the final trading hours. While select stocks from the FMCG, banking, and energy sectors garnered investors’ interest, stocks from the auto and capital goods sectors were at the receiving end. As regards global markets, the Asian markets closed in the green while the European markets are also trading in the positive currently.

The BSE Sensex closed 126 points lower, while the NSE Nifty closed lower by 38 points. The BSE Midcap and Smallcap indices also ended lower, down 2% and 1% respectively. The rupee was trading at 49.14 to the dollar.

The Indian markets started its day’s proceeding on a positive note mirroring the positive sentiment across other Asian markets. However, in the subsequent hours, markets pared the gains and sank into negative territory amidst concerns over economic and political uncertainty. The indices languished in the red in the remaining hours only managing to move closer to the dotted line in the final hour.

The overall breadth was negative with losers outnumbering gainers by a ratio of 1.7 to 1 on the BSE. While Bharti Airtel and Reliance Communications (each up 3%) remained gainer, Tata Motors and ACC (each down 8%) led the pack of losers on the BSE Sensex today.

As per a report by FICCI-Technopak, the Indian food industry is expected to grow from US$ 200 bn in 2008 to USD 300 bn by 2015. Of this, the food processing business (currently valued at US$ 85 bn) is expected to be a major contributor.

The key growth drivers for the Indian food industry over the longer term would be higher disposable incomes, shifts in spending orientation, increasing organised food retailing, increasing export opportunities and favourable regulatory environment. However, higher costs and pricing pressure coupled with the impact of economic slump may derail the sector’s potential in the near term. While ITC closed marginally higher, its peers Britannia and Nestle ended lower by 2%.

Software stocks closed weak led by HCL Infosystems (down 16%) and Oracle Financial Services (down 8%). As per IT research firm IDC, in the backdrop of financial meltdown and economic crisis, the global spending on IT is expected to reduce drastically in 2009. As per its revised projections, global IT spending is expected to grow by only 2.6% YoY in 2009, significantly lower than earlier projected growth rate of 5.9%.

The slowing IT spending is likely to impact Indian IT companies as well. However, these companies are in much better position than ever to weather slowing economy, considering that they are already involved in operations which remain critical to achieving further cost efficiency and productivity for their clients during slowdown.