IT falls on Obama speak

Alternate bouts of buying and selling led the indices to move around in a volatile manner during the final hour of trade. However, at the closing bell, the BSE-Sensex ended lower by around 4 points while the NSE-Nifty ended higher by around 8 points. On the other hand, stocks from the mid-cap and small-cap space ended the day on a firm note, higher by 1.9% and 2% respectively. While selling activity was witnessed in stocks from the IT, FMCG and energy spaces, realty and metals led the pack of gainers today.
Other Asian markets ended the day on a firm note. The European indices are currently trading firm as well. Rupee was trading at 49.45 against the US dollar at the time of writing.
Software stocks ended the day’s session on a weak note. This was on the back of the US President Obama’s reiteration that US firms need to cut back on offshoring in order to bring the ailing economy back on track. This time around, the US government, in its tax policy reform, has threatened to stop tax incentives to US companies which create job opportunities outside the US. Instead, it will continue the benefits for those companies that operate within the US.
Retail stocks ended the day on a firm note led by Pantaloon, Shopper’s Stop and Trent. As per a leading business daily, Shopper’s Stop is planning to go ahead with its expansion plans by opening twelve new stores in the next three years. This expansion is likely to be funded with a mix of internal accruals, debt and equity. In addition, the company is also planning to close unviable stores. As per the company, the rationale behind this expansion is the fall in rentals and a reversal of service tax. It also believes that the Indian economy is on its revival path. It is believed that the company will require a capex of Rs 910 m for the store openings and Rs 325 m for the inventory for these stores. It may be noted that the company recently closed down a handful of stores/ shops including its catalogue retailing venture, food business, book stores, and airport retail stores.
As per a leading business daily, investment bank Goldman Sachs believes that the Indian economy will recover in the second half of FY10. The rationale behind this is the strong domestic market. In addition it believes that the improving financial sector along with the excess liquidity in the system, easing financial conditions, declines in some key interest rate spreads and the removal of election uncertainty are factors that will help in picking up the economy. However, the chief economist of the bank stated that the key risk is “the formation of an unstable coalition and the ratcheting up of long bond yields due to greater borrowing by the government to finance the post-election budget”.