Indian Markets Wednesday Wrap-Up: GDP Downgrade Hurts Stocks

Mirroring the weak global sentiment, the indices languished below the dotted line throughout today’s trading session. The Sensex closed lower by around 90 points, while the Nifty closed lower by 40 points. Stocks from the mid-cap and small-cap indices also ended in negative territory. Stocks from the realty and auto sectors led the pack of losers on the bourses today. Rupee closed at 48.16 against the US dollar. While Asian markets closed in the red, the European indices too are currently trading in the red.

ITC is planning to develop properties across the country. In association with its wholly-owned subsidiary Fortune Park Hotels, ITC had already taken up property development work at Bangalore and Coimbatore. It is also considering a few more hotel properties to be developed in tier-II towns in Andhra Pradesh such as Vijayawada and Tirupati. While Fortune Park will invest in all these properties, ITC will provide the land. Out of 52 properties signed by Fortune Hotels across 41 cities, 25 properties are operational. The remaining 27 properties will be operational in the next two years. The hotel division contributes around 5% to ITC’s revenues. With real estate players (Unitech, DLF, Parsvnath) deciding to scrap their hotel projects on account of the recent crisis. We believe this would benefit the existing hotel players from the continued demand-supply mismatch. Considering this opportunity, ITC’s plan to increase its room inventory would benefit it in the long run. The stock of ITC closed weak today.

As per a leading business daily, Suzlon’s subsidiary REpower is likely to bag a wind turbine contract of 1,250 MW capacity in the next few months. It may be noted that this would be the world’s largest single order for wind turbines. The wind turbines would be installed for the purpose of setting up a wind farm. REpower’s potential customer for this contract would be Germany based utility company RWE. The contract is for about 250 large offshore wind turbine generators of the 5 MW/6 MW type and approximately 200 onshore wind turbines of the 2 MW type. This order will help improve Suzlon’s revenue visibility going forward as it currently holds a 66% stake in REpower and plans to take that to 91% by May 2009. The stock of Suzlon closed firm on the bourses today.

The mid-year review of the Indian economy conducted by the government said yesterday that the country should be prepared for the growth in 2008-09 as a whole to be around 7%. That is because the crisis faced by the developed nations is bound to have a negative effect on the world economy. It has also mentioned that the decline in commodity prices will help bring down inflation to more acceptable levels by March 2009.

On a more international note, despite emergency bailout funds from the US and Canadian governments to help the ‘big three’ auto companies avoid bankruptcy, Standard & Poor's rating services has decided not raise its "CCC" junk ratings for them in the near future. S&P recently downgraded Chrysler's corporate rating from "CCC+" to the even lower junk rating of CC. The agency feels that bankruptcy risk remains high for GM (GM), Chrysler and Ford (F) in 2009 because the government has shown reluctance to give open ended support to the three companies.