Indian Markets Tuesday Wrap-Up: Sensex Hits 10,000

Stocks surged during the final hour of trade, after remaining volatile for most of the earlier session. The BSE-Sensex closed with gains of over 140 points, after receding from the 10,000 mark. The NSE-Nifty was up around 60 points. Stocks from the mid-cap and small-cap indices outshone the large caps. Stocks from the oil & gas and banking sectors led the gains amongst BSE’s sectoral indices. Rupee closed at 47.84 against the US dollar.

HCL Tech was the leading gainer among large cap stocks and closed almost 18% up. Reports that the company has completed its acquisition of Axon were a key reason for these gains. The company has also reported winning orders worth US$ 1 bn during the current quarter, duly helped by the said acquisition. The company’s management, in an interview with a leading business channel yesterday outlined that the joint deal pipeline for SAP implementation (Axon’s core competence) is US$ 1.2 bn and that HCL can now address the US$ 23 bn SAP market.

“I believe that in an economic slowdown if you adopt a contrarian view, if you don’t freeze in the headlights but adopt a contrarian view, that it is a great opportunity to invest,” said HCL’s chief financial officer, Mr. Vineet Nayar.

If you were thinking that Indian IT companies will experience a very tough time due to slowdown in global software spending and non-critical nature of their offerings, think again. A report on Business Week states that India is gradually moving towards providing offshoring services for high-end projects like R&D and business transformation services. The report indicates that the re-training the Indian IT companies have provided to their employees to improve their skill set has come in handy in their move up the software value chain.

Software stocks closed in the positive today. Apart from HCL Tech, the pack was led by NIIT Ltd., Tech Mahindra, Wipro and Infosys.

In deference to what was reported by leading business dailies yesterday, Tata Steel’s European subsidiary Corus has denied rumours that it has any plans of merging with the parent and move operations to low cost China. The company, which has manufacturing operations in the UK and Netherlands, is looking at cutting costs to reduce pressure on its profitability, as demand continues to weaken.

Press Trust of India has reported that, economic slowdown notwithstanding, public sector financial firms are continuing with their hiring. LIC, for instance, plans to hire around 10,000 people by March 2009. SBI, India’s largest banking company is planning to hire about 20,000 clerical staff and 5,000 supervisory staff by the end of this fiscal.

While PSUs continue to hire, Indian exporters continue to feel the pain of a global economic slowdown. Reportedly, small exporters have cut about 65,500 jobs this year alone as recession in the US and Europe has led to a substantial decline in overseas demand. As a matter of fact, India’s exports fell in October for the first time in seven years.

To make matters worse on the economic front, a report from Business Standard says that India received 26% lesser foreign direct investment (FDI) in the month of October 2008, over the same month a year ago.

India’s second largest 2-wheeler manufacturer, Bajaj Auto, plans to shut its Waluj (near Aurangabad) plant for 10 days to cope up with the shortage in demand. Inventory build-up due to lower off-take during the festive season has also aggravated problems for auto companies like Bajaj. This plant has an installed capacity of manufacturing around 1 m vehicles a year. The stock, along with Hero Honda and Tata Motors gained in today’s trading.

In international news, CNN’s financial website reports that bankruptcy filings in the US have risen by 30% during the period October 2007 to September 2008. “The dramatic spike in both personal and business bankruptcies reflects an economy in distress," says the executive director of the American Bankruptcy Institution.