Indian Markets Monday Wrap-Up: Banks, Auto Drive Gains

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Includes: EPI, IFN, IIF, INFY, SAY, WIT
by: Equitymaster

Though the Indian market closed well above the dotted line, it witnessed some profit booking at higher levels during the final hour. The BSE-Sensex closed with gains of around 131 points, while the NSE-Nifty closed higher by about 40 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 led by metal, banking and realty sectors. However, stocks from the software, consumer durables and FMCG bore the brunt of profit booking.

Most other Asian markets ended on a firm note. The European indices are currently trading firm. Rupee was trading at 49.92 against the US dollar.

Software stocks closed mixed. While Tech Mahindra, HCL Tech and Satyam (SAY) led the pack of gainers, Wipro (NYSE:WIT) TCS and Infosys (NASDAQ:INFY) led the pack of losers. As per a leading business daily, TCS has brought about 10% of its UK workforce back to India. After the relocation of these 500 employees, TCS' staff strength in the UK stands at 4,500. The company has mostly pulled back its sales and administrative staff from delivery centres and client offices in the UK. It may be noted that the margins for onshore are much lower than offshore as per employee cost is about US$ 70,000 per annum for the former and US$ 30,000 for the latter. The move is part of TCS’s cost containment measures.

Textile stocks ended firm led by Vardhaman Textile and Arvind Ltd. As per a leading business daily, Alok Industries has completed expansion plans worth Rs 20 bn at its facilities in Vapi and Silvasa in Gujarat. The company has added 48,000 spindles to increase its capacity to 299,712 spindles as on March 2009 while weaving capacity has gone up to 153 m metres from 109 m metres. The company has also added new processing facility of 287 m metres in the home textiles division. It has also completed capacity enhancement in the knits and garment segments. Despite the global slowdown the company is receiving decent export orders. This capacity build up will help the company in catering its clients efficiently. However, the company continues to have a high debt to equity ratio of 2.5 times in its books.

As per the balance of payments (BoP) data released by the Reserve Bank of India (RBI) for the quarter ended December 2008, the current account deficit stood at US$ 14.6 bn as against US$ 4.6 bn in the corresponding period of the previous year, posting an annual rise of 217%. It is believed that huge defence procurement-related payments and advances for import orders in the backdrop of a depreciating rupee have inflated India’s current account deficit to this record (highest in 2 decades) levels.