Indian Markets Thursday Wrap-Up: Lower Inflation News Cheers the Markets

by: Equitymaster December 04, 2008    

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Buying activity in the index heavyweights continued unabated in the final trading hour causing the indices to close well above the dotted line. While realty and metal stocks garnered investors’ interest, select stocks in the consumer durable, software and pharma sectors lost favour. As regards global markets, while the Asian indices closed a mixed bag, the European indices are trading higher currently.

The BSE Sensex and NSE Nifty are closed higher, up by almost 480 points and 130 points respectively. The BSE Midcap and Smallcap indices ended higher by 3% and 2% respectively. The rupee is trading at 49.77 to the dollar.

Following its global peers, the Indian benchmark indices opened on a positive note and kept moving northward till the final hour of the trade. The lower inflation figure released today also aided the buying activity. The inflation rate dropped further to 8.4% for the week ended November 22 from 8.84% from a week ago mainly on account of the fall in prices of petroleum fuels. The overall advance to decline ratio was at 2.2 to 1 on the BSE. While Tata Communication and Unitech (each up 14%) led the pack of gainers on the NSE today, Sun Pharmaceuticals (down 1%) and HCL Technologies (down 0.17%) led the pack of losers.

As per a leading business daily, BHEL has secured a contract from Sultanate of Oman to erect and commission a series of 126 MW gas turbine generators. The contract is worth Rs 20 bn and is for the power projects planned by the Petroleum Development Oman (PDO). It would be important to note that the company has secured this contract amongst international competition and thus is indicative of the company’s competitiveness on a global level. The contract has a provision for further extension with mutual agreement, under which PDO can later buy additional units from BHEL. The project shall be executed over the next 6 to 7 years and will help BHEL further shore up its order backlog of Rs 1.04 trillion (at end of September 2008), thus strengthening its revenue visibility into the medium term. The stock of BHEL ended the day 6% higher while its peer ABB ended 5% higher.

As per a leading business daily, Tata Steel is introducing an early separation scheme (ESS) in its Jamshedpur plant in Jharkhand to downsize its workforce. As per the scheme, the company’s employees above 50 years of age are eligible to apply for ESS. Employees opting for ESS will get a consolidated amount as per the salary structure and will be entitled to get pension benefits. Currently the company has 34,000 employees in the plant and is planning to cut down the workforce by around 2,100 employees by way of this ESS. In the current scenario of slackening demand for steel and most developed countries entering recession, this move by the company will help it cut costs and thus improve its margins. While Tata Steel ended the day higher by 14%, its peer SAIL closed 6% higher.

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