Indian Markets Wednesday Wrap-Up: June Numbers Prop Up Auto Stocks

Although the Indian markets witnessed some volatility during the previous hour, they managed to end the day well above yesterday’s closing level. The BSE-Sensex ended with gains of about 150 points, while the NSE-Nifty ended higher by about 50 points. Stocks from the mid-cap and small-cap spaces ended the day on a positive note as well, recording gains of 1% and 0.3% respectively. Apart from stocks from the consumer durables space, buying activity was witnessed in stocks across the board, led by the realty, banking and auto spaces.

Most of the other Asian markets ended the day on a firm note today. The European indices are currently trading in the green as well. Rupee was trading at 48.00 against the US dollar at the time of writing.

Auto stocks ended the day on a firm note led by Tata Motors (TTM) and M&M. Maruti Suzuki announced its sales for the month of June 2009 today. The company reported a 23% YoY increase in sales as against the same month last year. While sales in the domestic market grew by 10% YoY, exports witnessed a growth of 175% and formed about 18% of total unit sales. The company registered its highest ever export sales during the month (over 13,000 units). A reason for the same is increased exports to European economies. It may be noted some European countries have been offering incentives to customers who switch to environmental friendly cars. Further, the overall increase in volume was largely driven by its A2 segment (comprising of the Alto, Wagon R, Zen Estillo, Swift, A-Star and Ritz) which grew by 22% YoY and formed about 62% of total sales during the month. On the other hand, its A3 segment (consisting of SX4 and DZiRE) witnessed a 5% YoY increase in volumes. This segment formed about 8% of total volumes during the month.

Sugar stocks ended the day on a firm note led by Balrampur Chini and Bajaj Hindusthan. In a move that will help in reducing sugar prices, which is stoked on account of supply constraints, a leading business daily has reported that the sugar industry is expecting the government to extend its duty-free raw sugar import policy by one year. This move will indirectly help in encouraging imports. A few months back, the government had removed duty as tight supplies were leading to higher sugar prices. It may be noted that sugar manufacturers were earlier allowed to source raw sugar from overseas at zero duty. But in turn, they had to export the same amount of refined sugar within a period of three years. As sugar production for the coming year is expected to be lower, this move would reduce the demand-supply gap.

As per a leading business daily, the six core industries – crude oil, petroleum products, coal, electricity, cement and finished steel – have registered a growth of 2.8% YoY during the month of May 2009. Apart from crude oil and refinery production, all other sectors registered a positive growth. It may be noted that the core sector performance has a weighting of 27% in the IIP. As per the World Bank economist, IIP is likely to remain in the positive territory as the manufacturing sector (especially the textile, auto and cement sectors) will help in keeping the IIP growth afloat.