India Markets Tuesday Wrap: India Down on Asian Cues

by: Equitymaster

Amidst gloom across most Asian markets, the Indian indices lost further ground and closed in negative territory. Although the indices moved in a narrow range until noon, profit booking picked up in the final trading hours. While the BSE Sensex closed lower by around 82 points (up 0.4%), the NSE Nifty lost around 24 points (down 0.4%). Stocks from the metal and pharma sectors bore the maximum brunt of profit booking. The FMCG and consumer durable stocks, however, gained on the back of some good set of results so far.

As regards global markets, Asian indices closed largely in the red while European indices have also opened lower. The rupee was trading at Rs 44.44 to the dollar at the time of writing.

Stocks from the PSU sector failed to evince much interest after the run up in valuations in recent months. PSU banks, in particular, have seen a major valuation upgrade with better performance as compared to their private sector peers. However the sustainability of the performance is not certain. As per a leading business daily, the PSU banks in the country are set to hire around 85,000 people in the next three years to meet the manpower shortage. Of these, around 34,000 will be officers and 51,000 clerks.

It must be noted that the public sector banks together are set to lose around a fifth of their employee base to natural attrition in the next 3 to 5 years. Hence will some of the incremental manpower will be used to fill up the vacant positions, others may be for specialized positions. However, this is once again expected to spurt the cost to income ratio for these banks. SBI and PNB were the biggest losers during the day.

Besides India, Tata Motors (NYSE:TTM) is also setting its eye on another market that is one of the fastest growing consumer of automobiles. Jaguar Land Rover, owned by the company, is in talks with a Chinese automaker to establish a manufacturing and sales joint venture in China. The joint venture could boost the JLR brand in China, now the world's biggest auto market after surpassing the United States last year. Tata Motors is trying to step up its network in China, which has emerged as the third-largest market for its Land Rover vehicles. It expects to boost sales in China to about 20,000 Land Rovers and 5,000 Jaguars in fiscal year 2011.

It may be recalled that Tata Motors had bought the Jaguar and Land Rover brands from Ford Motor Company (NYSE:F) for $2.3B in 2008. After struggling with the acquisition for more than a year due to debt taken on for the deal and a slump in demand that hit the luxury segment hard, Tata Motors has now been able to turn things around. Jaguar Land Rover sales rose 16% YoY in September 2010 to 19,528 units.