India Markets Wednesday Wrap-Up: Autos Shine During a Lackluster Day

by: Equitymaster

Indian indices had a largely volatile trading session today as they oscillated to either side of yesterday's close. After a brief stint close to the positive territory, profit booking in banking, capital goods and FMCG stocks dragged the indices into the negative by the end of the session. Good set of results and encouraging volume numbers, however, kept auto stocks in favour. While the BSE Sensex closed lower by around 57 points (down 0.3%), the NSE Nifty lost around 26 points (down 0.4%). The BSE Midcap and the BSE Smallcap on the other hand notched gains of around 0.3% and 0.9% respectively.

As regards global markets, Asian indices closed mixed today while European indices have opened in the negative. The rupee was trading at Rs 44.31 to the dollar at the time of writing.

As per a leading business daily, car sales recorded robust volume growth of 38% YoY in the month of October. This was attributed to not only festive season demand but also to a rapidly expanding economy and rise in affordability. Auto companies sold 182,992 cars in October, while sales of trucks and buses rose 18.2% to 50,835 units. According to SIAM estimates, India's auto sector is likely to grow by 18-20% in FY11.

Although demand in the developed nations remained subdued, auto companies have now been focusing on faster growing countries such as China. That said, not all is hunky dory. Margins have been under pressure due to rising input costs and this coupled with higher interest rates is likely to make current sales growth numbers unsustainable going forward. The stocks of Tata Motors (NYSE:TTM) and M&M (OTC:MAHMF) were the lead gainers in the sector.

Although the international economic bodies like the World Bank have been suggesting capital controls for emerging economies, India may not pay heed to it soon. Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, has once again cited that such controls are not necessary for India at the moment. Speaking at the G20 summit, he suggested that currently the capital controls that India has on debt instruments are sufficient.

Power financing major PFC announced its 2QFY11 results today. The company's net interest income rose by 27% YoY during 1HFY11 on the back of 28% YoY growth in advances. Bottomline expanded by just 13% YoY in 1HFY11 due to exchange rate losses, lower other income and higher tax outlay. Net interest margin, however, improved marginally from 4.2% in 1HFY10 to 4.3% in 1HFY11. The financer has seen robust growth in sanctions for power projects over the past two quarters. Also the ability to raise long term funds through the infrastructure bond route is expected to help it sustain margins.