Indian Markets Wednesday Wrap-Up: Second Inning Recovery

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Includes: EPI, IFN, IIF, NVS
by: Equitymaster

Even though the Indian markets began the day on a choppy note, they managed to end well above the dotted line. The BSE-Sensex closed with gains of around 200 points, while the NSE-Nifty closed higher by 45 points. Stocks from the mid-cap and small-cap space ended the day in the green as well. Buying activity was witnessed in stocks across sectors, with realty and energy leading the pack of gainers. However, stocks from the healthcare and auto space remained the lowest gainers.

Most other Asian markets closed on a mixed note, while the European indices are currently trading firm. Rupee was trading at 50.79 against the US dollar at the time of writing.

Pharma stocks ended the day on a firm note led by Biocon and Matrix Labs. The stock of Novartis ended the day on a strong note on news that its parent company, Novartis AG (NYSE:NVS) has offered to purchase an additional equity stake of 39% in its Indian arm. The purchase price for the same will stand at Rs 351 per share. The offer is likely to open in May 2009 and is subject to regulatory approvals. On completion of this open offer, the parent company will hold nearly 90% stake in Novartis. Currently it holds a stake of nearly 50.9%. The stock of Novartis had closed at Rs 276 yesterday. With the open offer price being 27% higher than yesterday’s closing price, the stock ended with gains of nearly 20% today.

Auto stocks ended the day on a mixed note with Bajaj Auto and M&M leading the pack of gainers. Stocks of Eicher Motors and TVS Motors ended on a weak note today. As per a leading business daily, M&M is looking to enter all the segments in the two-wheelers space. As per the company, it will roll out models in the 100 cc, 125 cc and 150 cc mobike segments and also in the ungeared low and high-powered scooter segments. As per the management, the project is complete and it has in fact already started marketing activities in selected cities. It may be noted that the company had acquired Kinetic Motors almost a year back. It is believed that the company is looking to take on industry leaders such as Hero Honda and Bajaj Auto. However, it will be a difficult task for M&M to snatch market share from these leaders given their entrenched positions.

Indian IT companies are having a tough time amidst the ongoing economic slowdown. Clients of Indian IT companies are lowering their costs and are allocating budgets on a monthly basis rather than one-time allocations (as they were doing earlier). Moreover, most of them are not undertaking long-term discretionary investments. As a result, multi-year-multi-million deals have dried up, thereby hampering the revenue visibility of IT companies going forward.