Indian Markets Friday Wrap-Up: Credit Growth Slows to a 5 Year Low

After opening on a muted note, the Indian indices continued their northward journey throughout the day. However, during the final hour of trade, on account of profit booking, the markets came off from the days’ high. The BSE-Sensex closed higher by around 85 points, while the NSE-Nifty ended higher by around 10 points. The overall market breadth was marginally positive with gainers outnumbering losers in ratio of 1.1 to 1 on the BSE. Stocks from the mid-cap and small-cap indices ended lower, with a fall of 0.7% and 1.2% respectively. Stocks from the engineering, software and auto sectors led the pack of gainers, while select realty and FMCG stocks ended the day on a weak note.

The Asian indices ended the day on a firm note. The European indices are also currently trading in the green. Rupee was trading at 47.16 against the US dollar at the time of writing.

As a result of the dwindling demand and poor economic scenario in the US, Infosys Technologies (INFY) I plans to divert focus towards Europe and emerging markets in the coming years. Due to the cost cutting measures adopted by cash-strapped companies, the growth potential in the US looks limited as the company does not expect the demand to revive before mid of 2010. According to the management, the company aims to grow Europe’s proportion to its revenues to 40% from 30% at present. The revenue from emerging markets is expected to double from the current 10% in the next couple of years. The US’ portion of the pie will shrink from 60% to 40%. It is also eyeing acquisitions in non-English-speaking developed markets to boost sales by 10%. Such a diversification will go a long way in lowering the company’s dependence on the US and aiding growth as emerging markets come to the forefront of development. Software stocks ended the day firm.

In a bid to expand its international presence, Dabur is planning to set up a new manufacturing plant at Egypt as a part of its strategy to expand its international presence. The proposed facility will be Dabur’s second unit in Egypt for production of personal care products. The plant will support the company’s foray into East, North and South Africa where it is in the process of setting up a distribution network. The investment behind the new plant will be more than Rs 150 m. The new plant is expected to be operational in 2-3 months. It is also expanding its presence in Africa and is setting up its distribution network in Kenya and Tanzania. Dabur expects its international business to grow by around 30% in the next couple of years, despite the downturn. This will be twice the pace of the growth it is witnessing in its domestic business. The overseas business accounts for around 20% of Dabur’s revenue. FMCG stocks ended the day on a negative note.

As per a leading business daily, the bank credit growth has fallen to a five-year low of almost 15.9% YoY for the fortnight ended May 22. This is quite low as compared to the 25.5% YoY growth last year. It is estimated that apart from the lower demand for funds due to fewer new projects, last year’s high base may also be behind the sharp moderation in growth rates. However, credit growth is expected to pick up in the short to medium term, in line with the revival in demand and investment as banks also lower their prime lending rates further. Banking stocks ended the day flat.