Indian Markets Monday Wrap-Up: Volatility Plagues the Indices

by: Equitymaster

The Indian markets had a rather volatile trading session today. The morning session saw the indices fluctuating to either side of Friday's close before selling activity intensified and pushed them into the red. Any attempts thereafter to move towards the dotted line proved futile and the indices closed well into the red. While the BSE Sensex closed lower by around 114 points (down 1%), the NSE Nifty lost around 28 points (down 1%). Midcap and small cap stocks were also at the receiving end, notching losses of 1% and 0.4% respectively. Losses were largely seen in banking and oil & gas stocks.

As regards global markets, most Asian indices closed weak today while European indices have opened on a mixed note. The rupee was trading at Rs 46.36 to the dollar at the time of writing.

MNC pharma stocks showed mixed trend. While Aventis
(NYSE:SNY)and Pfizer (NYSE:PFE) found favour, GSK Pharma (NYSE:GSK) and Novartis (NYSE:NVS) closed in the red. Aventis notched gains of 2% in today's session. The company has done well in the year so far with its domestic business (excluding the product 'Rabipur') and exports growing by 14% YoY and 24% YoY in 9mCY09 respectively. Aventis is a very strong player in the chronic therapy space and although there has been intense competition in certain therapeutic areas in which the company is present, it has nevertheless managed to hold on to its market share. Further, the company is also looking to tap the rural markets to augment its sales for which it has set up a separate marketing division. Thus, these moves are expected to bolster volumes going forward.

Tata Motors (NYSE:TTM) has had a very strong start to 2010 with global sales for January growing by 93% on a year on year basis. As reported in a leading business daily, these sales are comprised of Tata, Tata Daewoo and Hispano Carrocera range of commercial vehicles, Tata passenger vehicles along with distributed brands in India, and Jaguar and Land Rover. While commercial vehicles in January 2010 grew by 115% YoY, sales of passenger vehicles registered a growth of 76% YoY. What is more, the acquired brands Jaguar and Land Rover also grew at a dazzling rate. While Jaguar sales were higher by 122% YoY, Land Rover sales grew by 219% YoY. Having said that, cumulative sales of Jaguar Land Rover for the fiscal (April 2009 to January 2010) declined by 20% YoY. The stock, however, closed 1% lower.

The company's performance in the December 2009 was also robust with sales growing by 63% YoY and margins expanding from a paltry 1.9% in 3QFY09 to a healthy 12.8% in 3QFY10. Improved consumer sentiments, a favourable financing environment and a low base effect contributed to the robust performance both in the December quarter and in January 2010.

Inflation, meanwhile, continues to scale new heights. As per reports, the wholesale price index (WPI) rose 8.56% in January from a year earlier, the highest since November 2008. This has accelerated from a 7.3% rise in December. This means that the pressure on RBI intensifies to raise interest rates. The problem that is confronting the RBI is also the soaring fiscal deficit as a rise in interest rates will make borrowing costs dearer.