Indian Markets Thursday Wrap-Up: Markets Higher by a Whisker

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

After weathering the alternate bouts of buying and selling activity through the day, the Indian markets closed marginally higher than yesterday’s levels. The BSE Sensex and NSE Nifty ended higher, up by around 13 points and 8 points respectively. The stocks from the mid-cap and the small-cap spaces ended higher, up by around 0.33% and 0.74% respectively. Buying activity was witnessed among the stocks from the metals, realty and healthcare sectors. Engineering and auto stocks were at the receiving end. The overall market breadth was positive, with gainers outnumbering losers in ratio of 1.2 to 1 on the BSE.

Most of the Asian markets ended the day on a weak note. The European markets are also trading weak currently. The Rupee was trading at 47.91 against the US Dollar at the time of writing.

Steel majors like SAIL, Ispat and Jindal Steel are planning to raise the price for various products by 2-5%, on account of growing raw-material prices. Many companies increased their prices in the months of May and June, and the ones that did not are reviewing the situation for the possibility of a price hike. It is worth noting that steel prices fell sharply last year due to a lack of demand on account of the economic slowdown. Domestic companies are seeing a slight revival of demand in the domestic market from sectors like infrastructure, rural housing and automobile. The stocks from steel sector ended the day on a positive note.

The global downturn has had a severe impact on the billing rates for major Indian IT companies like TCS, Infosys (NASDAQ:INFY) and Wipro (NYSE:WIT). Billing rates for new as well as existing clients are estimated to be down by around 30% to 40% touching rock-bottom of US$ 16 per hour. To make matters worse, despite these low billing rates, the companies have not seen any corresponding improvement in the deals inflow. According to Gartner, on account of uncertainty, IT budget constraints and subdued market sentiments, the prices of IT services will keep declining till 2010. Moreover, international companies like Accenture (NYSE:ACN), which are known for delivering premium-priced high-end IT services, are also venturing into low-end IT ventures moreover at a decreased price level. All this will result in a dent in the Indian IT sector, which was growing at a stupendous rate of about 30% before the crisis. Nevertheless, the silver lining in the cloud is that companies have still been able to maintain their topline through proactive cost-containment measures. After trading most of the day in the negative, the stocks from this sector closed in the green.

Economic recession in the developed countries left Indian exports with less takers, resulting in a decrease in merchandise export by 29.2% in May. The Finance Ministry seems to accept that the three stimulus packages have not done much to revive the exports. The Union budget is expected to provide some respite to the sector in terms of fringe benefit taxes and interest subsidies.