Indian Markets Tuesday Wrap-Up: Cement Stocks Firm Up Gains

Markets witnessed a volatile trading session today. After opening in the red, markets quickly moved into the positive territory during the morning session. However, after nose diving in the red during the afternoon session, persistent buying activity led the indices to close well above the dotted line. The Sensex closed higher by around 60 points, while the Nifty closed higher by 5 points. Stocks from the mid-cap and small-cap indices ended marginally in the red. While stocks from the cement, auto and banking space led the pack of gainers, stocks from the realty and power sectors failed to garner investors’ interests. Rupee closed at 48.6 against the US dollar. The Asian markets closed on a mixed note. However, the European indices are currently trading firm.

Engineering stocks closed firm led by Praj Industries, Voltas and BHEL. Punj Lloyd has won an order worth Rs 2.6 bn for civil work on Sikkim’s first greenfield airport project. This project was awarded to the company by the Airport Authority of India (AAI) and is scheduled to be complete within a period of 24 months. The scope of this project will include construction of a 30 meter wide and 1.7 km long runway, taxiway, amongst other work for the airport. The airport is believed to be built at a height of 1404 meters above sea level. While the size of the order may be relatively low as compared to some of the other projects the company has won in the recent past, it is a positive development for the company considering it is the company’s first greenfield airport project in India.

Bank stocks ended on a mixed note with stocks of Canara Bank and Bank of India being the key gainers, while Dena Bank and PNB lead the pack of losers. As much as the PSU banks would prefer to remain cautious on NPAs, the government’s coercion for aggressive lending seems to be disallowing the same. The finance ministry has asked PSU banks to increase lending to troubled sectors such as textiles, small and medium enterprises (SMEs), automobile and housing. The reason behind the same is due to the ministry’s discontentment over the advance growth in the past few months, which is affecting economic growth. However, the bankers fear that aggressive lending to troubled corporates and retail customers may lead to higher loan defaults in the subsequent months and increase their NPA provisioning pressures.

In the meanwhile, engineering and construction firms have recorded their slowest order inflow in the quarter ending December. In fact, it is believed to be the slowest order intake recorded in the last two years. As per a leading business daily, the growth in order book has increased by only 10% YoY. On a sequential basis, the order inflow has dropped by 36%. This is major contrast when compared to numbers from previous quarters when the order book of the sector grew by 128% YoY in 1QCY08, 136% YoY in 2QCY08 and by 52% YoY in 3QCY08. The reason behind the same is due to a large drop in international orders (down by 26% during the quarter). On the other hand, domestic orders (which include centre, state and local firms) have increased on a year on year basis.

US auto sales figures for the month of December were announced yesterday. It is believed that the last quarter’s numbers have been the lowest since 1992, with the total industry’s sales dropping to 896,124, down by nearly 36% YoY. As such, the total sales for the year 2008 dropped by 18% YoY to 13.2 m vehicles.