India Markets Thursday Wrap-Up

by: Equitymaster

Last minute buying led to the indices creating new intraday highs and while they did retrace from those levels, they still ended the day on a strong note. The BSE-Sensex edged higher by around 130 points, whereas NSE-Nifty logged in gains in the region of 40 points (up 0.7%). BSE Midcap and BSE Small cap cap indices also ended in the positive today, registering gains of 0.7% and 0.4% respectively. Nearly three stocks gained for every one that closed in the negative on the Sensex today.

Majority of the Asian indices also closed positive today whereas Europe is trading weak currently. The rupee was trading at Rs 44.9 to the dollar at the time of writing.

Today's advance could possibly mean that the markets seem to be in a mood to end the year on a positive note. Although even if the Indian indices were to decline tomorrow, it would still end the year on quite a positive note. And while emerging economies are on a secular bull run, we are of the opinion that 2011 could well be the year where leadership would change hands. The past couple of years belonged to economies that were net importers of commodities. This is because commodity prices were on the lower side and hence, countries like India, which is a net importer, could take advantage of it and thus, help its firms increase its margins. However, with commodity prices on the rise now, exporters like Brazil and Russia might just have an edge over India going into 2011.

L&T, the underperformer of the past few months vis-a-vis the Sensex, ended strong today. The counter gained nearly 1%, presumably on the back of bagging of new orders. As per a leading daily, the company has bagged two new orders worth more than Rs 11 bn. One of the orders is from Tata Steel while the second order, roughly equal in size, came from Tamil Nadu water supply and drainage board. Thus, looks like 2010 will end on a good note for the company. The next year does not look very bad either as capacity expansion by India Inc will ensure that orders will keep flowing to quality capital goods manufacturers like L&T. This, along with the fact that the counter has been a sort of an underperformer in the past few months, could result in the stock gaining some good ground in the new year.

Punjab & Sind Bank, the latest PSU to make its debut on the bourses had a reasonable outing today and closed around the Rs 130 mark, a premium of 14% from its issue price of Rs 114 for retail investors. It should be noted though that the bank also touched a high of 149 before it settled at this lower mark. Punjab & Sind Bank is the last Government owned bank to list its shares on the exchange. As the end of July 2010, it had a network of 920 branches and 63 ATMs. Like some of its peers, it can also emerge to become a strong regional player as also grow its profitability once it assumes a larger scale. Hence, in view of this, looks like there is still some upside left in the counter from a long term perspective.