Market Analysis: Weekly roundup till Feb 13

Benchmark indices gained more than 2.0 per cent in the last week on the back of short covering especially by Foreign Institutional investors rather than cash based buying.

Sensex gained 2.3 per cent and closed at 16152 during the week, while Nifty ended the week at 4826 gaining of 2.3 per cent over its previous weekends close.

Fears on European countries economic recovery prompted FII"s to pull money out of Indian equities to the tune of Rs 3500 crore in 2010 so far.

During the week BSE Mid-cap index and Small-cap index gained 1.1 per cent and 0.5 per cent respectively. BSE IT and Consumer Durable index were the top gainers for the week, up by 3.6 per cent and 2.4 per cent respectively.

Going Forward

On Global front, reports of France and Germany proposing a bailout plan for Greece could influence the markets. On Domestic front, easing of foreign investment rules will have a positive effect on the market.

Reports on government borrowing programme being with the current year"s target could alleviate market fears of higher borrowing.

Corporate

Mahindra, BAE Systems to invest USD 21.25 mn in defence JV
Mahindra & Mahindra Ltd and the UK"s BAE Systems, both will inject 21.25 million dollars (Rs.99 crore) over a three-year period into their joint venture company, Defence Land Systems India.

The company, which is 74 per cent owned by Mahindra and 26 per cent by BAE Systems, is expected to be up and running in the near future.

Defence Land Systems India will be headquartered in New Delhi and will manufacture vehicles at a purpose-built facility south of Faridabad in the National Capital Region.

The joint venture company will manufacture Axe high mobility vehicle as well as up-armoured and bulletproof Scorpios, Boleros, Rakshak, rapid intervention vehicles and the Marksman light-armoured vehicle. It would also develop a mine-protected vehicle specifically designed to meet the needs of the Indian armed and paramilitary forces.

The company may be involved in a number of future artillery programmes with an ambition to become an artillery centre of excellence in India that covers not only manufacturing but also development, testing and support.

Auto sales hit record high in Jan 2010
The Indian auto industry reported the highest ever sales in a single month at over 1.1 million units in January, boosted by easy availability of retail finance and soft interest rates.

According to the Society of Indian Automobile Manufacturers (Siam), total sales in the domestic market stood at 1,114,157 units, against 768,698 units in the year-ago period, a jump of 44.94 per cent.

High growth in terms of percentage in January was also contributed by last year"s low base. Reduced commodity prices compared to last year also helped. The domestic passenger car segment also posted the highest ever sales at 145,905 units against 110,300 units in the corresponding month last year, up 32.28 per cent.

It was the 10th straight month of growth by the segment. The car manufacturers had earlier touched the peak at 129,358 units

in March 2009. During the month, major manufacturers, including Maruti Suzuki, Hyundai Motor, General Motors and Mahindra & Mahindra, reported their individual record breaking sales.

Economy

Govt likely to import 1mt sugar for subsidized sales
The government plans to import one million tonne of ready-to-eat white sugar through state-owned trading companies for selling to local consumers at subsidized prices amid growing concerns that India"s sugar production may not fully recover

even in the next season beginning October. It may also hedge its purchases on the London-based LIFFE commodity exchange to reduce risks in a highly volatile international market.

As India is currently at the peak of the 2009-10 sugar producing season, this import is expected to be timed only after Apr 2010, when the cane harvest is over.

State-run agencies, such as STC, MMTC and PEC may be asked to import refined sugar and sell it to traders and bulk users at the ports. This will help it save transportation cost and cool down wholesale prices immediately.

Bulk users account for more than half of India"s sugar consumption. Domestic sugar estimate for 2010-11 is at least 2 million tonne lower than the ISMA estimate of 22 to 23 million tonne. We feel that the poor southwest monsoon last year has had an adverse impact and the increase in sugar acreage may not compensate adequately to take the sugar output beyond the 20 million tonne level.

Growth will be more than 7.2 per cent, says FM
Finance Minister Pranab Mukherjee said economic growth for the current financial year would be higher than the advance estimate forecast of 7.2 per cent. The advance estimates released by the Central Statistical Organization (CSO) has pegged

economic growth at 7.2 per cent, lower than the 7.75% estimated by the finance ministry in its mid-term review released earlier.

Reserve Bank of India (RBI) which has pegged economic growth at 7.5 per cent in its third quarter monetary policy review. The Centre for Monitoring Indian Economy (CMIE) has projected the GDP growth at 7.75 per cent for the current financial year.

Further Mukherjee added, even a 7.2 per cent growth is an optimistic prospects for the Indian economy, when compared to the global economic environment.

(An article by DAS CAPITAL MANAGEMENT & ADVISORS Pvt Ltd)