India Markets Tuesday Wrap-Up: Bluechips Steal the Show

by: Equitymaster

Broad based buying across sectors helped the Indian stock market to stay ahead of its peers in Asia today. Led by buying interest in telecom, software, auto and realty stocks, the benchmark indices in India recorded the highest gains in the region. That said, it were primarily the largecap stocks that evinced investor interest. The mid and small cap stocks remained out of favour. While the BSE-Sensex closed higher by around 178 points (up 1%), the NSE-Nifty closed higher by around 49 points (up 1%). Meanwhile, the BSE Midcap index ended flat and the BSE Small cap index closed 0.4% lower.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 44.75 to the dollar at the time of writing.

As per a business daily, the second largest manufacturer of medium and heavy commercial vehicles (M/HCV) in India Ashok Leyland and Japanese auto-maker Nissan Motor Company have rolled out their first Light Commercial Vehicle. It may be recalled that the companies entered into an agreement for vehicle manufacturing and technology development. As per the agreement, both companies will together make an investment of Rs 23 bn. The use of their existing facility has made the company utilise only half of the earmarked investments, Ashok Leyland is cognizant of the fact that the CV industry is cyclical in nature. Therefore, to keep its revenues growing at a stable pace, it will have to venture into non-cyclical businesses as well to reduce its dependence on any single market.

Although the company managements have declined to comment on the development, leading retailer Walmart is reported to be looking at buying a stake in Big Bazaar's back end operations. Walmart has an equal joint venture with the Bharti group (which owns Bharti Airtel) since 2006 named Bharti Walmart. However, this partnership is "non-exclusive" in nature, which means Walmart can forge other alliances in India. Bharti Walmart operates in the wholesale and back-end segments - the two areas in retail where foreign players are currently allowed. Walmart, the world's largest company with revenues of US$ 408 bn in 2010, is looking at accelerating investments in the space. The regulations over FDI in India retail continue to remain a hurdle.

Meanwhile, foreign direct investment (FDI) in India registered its second consecutive decline in February, 2011. The inflows dipped by 30% YoY to US$ 1.2 bn in the backdrop of financial turmoil in Europe. In February, 2010, India had attracted foreign direct investment (FDI) worth US$ 1.7 bn. During the 11-month period from April, 2010, to February, 2011, FDI inflows into India declined by 25% YoY to US$ 18.3 bn, which makes it imperative for the country to fine tune its policies to attract overseas investment.