Indian Markets Thursday Wrap-Up: Inflation Dampens Sentiments

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Includes: EPI, IFN, IIF, TCL-OLD
by: Equitymaster

Taking cues from their global counterparts, the Indian indices began the day on a positive note. Thereafter, persistent selling activity led the indices to end their two day streak of gains. While certain amount of buying activity was witnessed during the final hour of trade, markets managed to settle below the dotted line. The Sensex closed lower by around 20 points, while the Nifty closed lower by around 40 points.

Stocks from the mid-cap and small-cap indices ended marginally in the red. While stocks from the auto, software and metal sectors led the pack of gainers today, stocks from the realty and capital goods space bore the brunt of profit booking. Rupee closed at 48.95 against the U.S. dollar. The Asian markets ended on a positive note today. The European indices are currently trading weak.

Numbers announced today showed inflation creeping upwards for the second consecutive week. The wholesale price index [WPI] rose 5.64% for the week ended January 17th, a little higher than the 5.60% in the previous week. This slight increase could in part be attributed to the lag effect of the recent truckers strike.

Telecom stocks ended on a weak note led by Bharti Airtel and Idea Cellular. Tata Communications (NYSE:TCL-OLD) announced its 3QFY09 results recently. The company's revenues grew by 17% YoY during the quarter as well as in 9mFY09. The company recorded this growth on the back of a steady performance by all its business segments - wholesale voice-sales, enterprise & carrier data-sales and others.

During the quarter, the company's operating margins expanded by 4.2% YoY largely on account of lower network costs. However, for 9mFY09, margins improved by 3.3% YoY. Profitability wise, the company recorded 200% YoY in numbers during the quarter. However, this was mainly on account of an extraordinary expense which the company incurred during 3QFY08. Excluding the same, profits are down 38% YoY during the quarter.

Bharat Forge has inked a joint venture with French nuclear major, Areva (OTCPK:ARVCF) to build a manufacturing facility for heavy forgings in India. Areva is one of the world's largest nuclear players having a presence in the design, manufacture and supply of nuclear power plants, components and fuels globally. The plant is expected to be operational by 2012. This is a positive development for Bharat Forge considering that the company is looking to reduce its dependence on the automotive segment. In addition, this development will allow the company to participate in the very lucrative nuclear power business in India.