India Markets Wednesday Wrap-Up: India Trails Asian Gainers

by: Equitymaster

Despite opening in the positive, the Indian stock market indices had a weak outing today. However, the indices recovered from the day's lows and managed to end the session on a flat note. While the BSE-Sensexclosed 30 points higher (a 0.2% rise), the NSE-Nifty closed lower by 3 points (down 0.05%). The BSE Midcap and the BSE Small cap indices, nevertheless, managed a better show. They managed to see gains of 0.7% and 0.8% respectively. As regards the sector indices, realty and consumer durables stocks managed to see decent gains. However pharma and IT stocks lost some investor favour.

As regards major global stock markets, most Asian indices closed in the green. Most European indices opened mixed. The rupee was trading at Rs 45.01 to the dollar at the time of writing.

India seems to have lost some of its sheen as a global investment destination. With a slow global economic recovery in the US and Europe, FDI inflows into India dropped by a whopping 48% to US$ 1.1 bn in January 2011. Countries including Mauritius, Singapore, US, UK, Netherlands etc. are the major investors into India. In the previous year, the inflows stood at US$ 2 bn for the month. During the first ten months of the current fiscal (April-January FY11), FDI declined 25% YoY to US $17 bn compared to US$ 22.9 bn in corresponding period of FY10. In view of the declining FDI inflows, the RBI is considering setting up a panel. This will help figure out the reasons behind the slowdown in FDI. It will also try and make suggestions on how to encourage more inflows.

Despite rising interest rates, fuel costs and higher costs of living, car sales in India have shown no signs of slowdown. Sales have touched a monthly record in February as customers moved up their purchases on the expectations that the government would hike excise duties on vehicles in its latest Union Budget. The industry was expecting the government to increase excise tax by 2% in its budget for FY12. The tax was raised by 2% to 10% in the previous budget. An increase in taxes would force car companies to pass them on to customers. However, the tax were kept unchanged.

Local car sales jumped 23% YoY in February 2011 to 189,008 vehicles, according to date from Society of Indian Automobile Manufacturers (SIAM) This figure beat January's all-time high monthly sales of 184,332 cars. India is still one of the fastest growing auto markets in the world. Easy availability of loans, rising incomes and a young population has made it a major destination for any car company. The scooters segment posted a 27% rise to 185,460 units in Feb. Sales of trucks and buses grew 11% to 64,057 units as companies such as Tata Motors (NYSE:TTM), Ashok Leyland and M&M Ltd (OTC:MAHMF) recorded higher sales volumes. Auto stocks closed in the positive in today's trading session.