Companies & Sectors
Auto makers maintain steady growth in March

Major vehicle manufacturers continue to register double-digit sales, notwithstanding concerns of a slowdown due to higher interest rates and input costs

Major Indian auto makers registered steady, double-digit sales in March, concluding the financial year 2010-11 on an encouraging note, despite expectations of a slowdown in demand.

Maruti Suzuki, the country's largest passenger car maker, today announced robust sales growth of 28%, even better than that in February, whereas Tata Motors sales grew by nearly 11%, about the same rate as in the previous month and Mahindra & Mahindra registered 18% growth, which was a touch slower than in February. The country's largest two-wheeler manufacturer Hero Honda registered its highest ever sales for the month of March for a growth of over 24%, whereas Chennai-based TVS Motor Company grew a notch faster at 28%. Figures for Bajaj Auto, the other big two-wheeler maker, were not available as yet.

Auto companies have registered surprisingly good sales over the past few months, driven by growing demand from a growing middle class and easier access to loans. Experts expect this to moderate sooner than later, on increasing interest rates and higher input costs that could dent growth.

Hyundai Motor, the country's No.2 passenger car maker, seems to be feeling the pressure already, with sales almost stagnant in March. The company reported a marginal rise in total sales for the month at 55,552 units from 55,027 units a year ago. Domestic sales increased by a little over 1% to 31,822 units from 31,501 units. Exports also increased marginally to 23,730 units from 23,526 units. "With rising interest rates and increasing prices due to higher input costs the market is less buoyant than what it was last year," said Arvind Saxena, Hyundai Motor India's director (marketing and sales).

The situation could be compounded for companies who rely on their schedules and supplies from Japan, where last month's devastating earthquake, tsunami and the nuclear crisis that followed has disrupted assembly plants, parts manufacturers and the global supply chain. Understandably, sales in Japan in March are reported to have slumped by more than a third.

Reflecting the buoyancy in auto sales so far, the BSE-Auto index gained 7% through March, against 5% on the Sensex. However, the auto index has lost 9% in the January-March 2011 period compared with the Sensex which declined 5% during the quarter.

Maruti Suzuki announced today that it sold 1.21 lakh units in March, compared to 95,123 units in the month last year. Domestic sales, in fact, were up nearly 39%, that more than made up for a 26% drop in exports. While sales of its basic M800 model continued to stay low, in the A2 segment that comprises such models as Alto, WagonR, Estilo, Swift, A-Star and Ritz sales climbed by over 43% to 78,460 units from 54,762 units a year ago, and in the A3 segment with SX4 and DZiRE models sales increased by 33% to 13,910 units from 10,453 units.

Overall for 2010-11, sales were higher by 24.8% to 12.71 lakh units from 10.18 lakh units in the previous financial year, Maruti Suzuki said. As can be guessed, domestic sales constituted the chunk at 11.32 lakh units, compared to 8.7 lakh units in the year before, a growth of 30%. Exports declined by 6.31% to 1.38 lakh units from 1.47 lakh units in 2009-10.

Tata Motors said today that it sold a total 83,363 units in March, against 75,129 units in the corresponding month last year. In sharp contrast to Maruti, Tatas' domestic passenger vehicle sales registered a marginal fall to 27,678 units from 27,760 units in March last year. However, exports jumped by 44.51% from 4,105 units to 5,932 units, the company stated.

The Indica range sold 6,937 units, down 40%, and the Indigo family sold 7,197 units, 5% lower than in the month a year ago. The Sumo, Safari and Aria models accounted for 4,837 units, a jump of 24%, while sales of its much-touted small car Nano maintained a good tempo at 8,707 units. It sold 8,262 units in February.

The company did well in the commercial vehicles segment, which is its core strength, with a 15% increase in domestic sales at 49,753 units, from 43,264 units in March last year. Light commercial vehicles sales were up by 18% at 26,416 units, while medium and heavy commercial vehicle sales grew by 12% to 23,337 units.

Overall for 2010-11, Tata Motors posted a 25% jump in sales to 8.03 lakh compared to 6.42 lakh units in the previous year. It registered its highest commercial vehicles cumulative sales in the domestic market at 4.46 lakh units, an increase of 20% over the corresponding period in the previous fiscal. Exports were hugely encouraging, with a growth of 70% to 58,044 units from 34,141 units.

Hero Honda said it sold 5.15 lakh units in March, compared to 4.14 lakh units in the month a year ago. The company said that it had crossed the 50-lakh mark for the entire year 2010-11, dispatching cumulative sales of 54.02 lakh units compared to 46 lakh units in the previous year, up a strong 17.44%.
Managing director and CEO Pawan Munjal was naturally delighted. "We are delighted with this year's sales performance, which far surpasses our initial guidance of 5 million. Our growth rate is reflective of our strategic and marketing prowess, which has ensured our sustained market leadership," Mr Munjal said.

TVS Motor Company said it sold 1.91 lakh units in March, against 1.49 lakh units in the corresponding month last year. Domestic sales stood at 1.62 lakh units, up by 28.43% over 1.26 lakh units in the year ago period. Exports of two-wheelers in the month rose by 31% to 26,979 units from 20,585 units.
For the entire 2010-11, sales jumped by 33.17% to 20.46 lakh units from 15.36 lakh units in the previous fiscal. The company's three-wheeler sales also jumped by 82% to 4,427 units from 2,431 units, the company stated.


Wipro to Acquire SAIC’s global oil and gas information technology services business

"The acquisition of SAIC's global oil & gas information technology practice will strengthen Wipro's existing energy business unit in becoming a long term strategic partner in our customer's transformation journey," Anand Padmanabhan, senior vice president, Energy, Natural Resources and Utilities SBU, Wipro Technologies said

Wipro Technologies, the global IT business of Wipro, a leading Information technology, consulting and outsourcing company, announced today that it has signed an agreement to acquire the global oil and gas information technology practice of Science Applications International Corporation (SAIC), for an all-cash consideration of around $150 million, subject to adjustments.

SAIC's global oil and gas information technology practice provides consulting, system integration and outsourcing services to global oil majors with significant domain capabilities in the areas of digital oil field, petro-technical data management and petroleum application services addressing the upstream segment.

As a result of the transaction, nearly 1,450 employees are expected to transition to Wipro across North America, Europe, India and Middle East.

Wipro's Energy, Natural Resources and Utilities Strategic Business Unit (SBU) is a high-growth SBU and this acquisition will further strengthen Wipro's leadership position. IT spend in this sector is expected to grow as customers increasingly look to grow newer streams of revenues, optimize their operational cost and find better ways to become environmentally conscious.

Anand Padmanabhan, senior vice president, Energy, Natural Resources and Utilities SBU, Wipro Technologies said, "Oil & gas companies are investing in the upstream business while looking at rationalizing cost through IT. The acquisition of SAIC's global oil & gas information technology practice will strengthen Wipro's existing energy business unit in becoming a long term strategic partner in our customer's transformation journey. SAIC's domain consultancy and competencies significantly enhances Wipro's capabilities in the upstream oil & gas space and further strengthens Wipro's position as an end to end leader in servicing customers."

"We are excited at the prospect of joining a company that has such a strong, strategic focus in multi-national commercial IT services," said Rex Ballard, senior vice president and general manager of SAIC's Commercial Business Services business unit.
Completion of the acquisition is subject to customary closing conditions and regulatory approvals.


Funds investing in global assets have failed to perform

In 2007, as many as eight funds were launched that planned to invest overseas. All of them have performed very badly since inception. On an average, they have given returns as low as 0.1%. When they were launched, we had pointed out that these funds were not worth it

Retail Indian investors who believed that investing in funds that buy overseas assets will yield higher returns would have lost their faith in these funds after a long wait. Only three to four funds among the lot of 15 funds have been able to give double digit returns.

Funds such as Birla Sun Life Commodity Equities Fund-GPM, Birla Sun Life Commodity Equities Fund- GA, Birla Sun Life Commodity Equities Fund-GMC, and Mirae Asset Global Commodity Stocks, have given double digit returns of 16.2%, 26.4%, 18.1%, and 11.6 % respectively. All the others have given either a single digit return or negative returns, worse than a decent bank deposit.

In 2007, as many as eight funds were launched that planned to invest overseas. How have they done? All of them have performed very badly since inception. These eight funds on an average have given returns as low as 0.1%.These include ICICI Prudential Indo Asia Equity Fund-Ret with 2.6% return, Birla Sun Life International Equity Fund-Plan A (-0.7% return); Birla Sun Life International Equity Fund-Plan B

(-1.6% return); Kotak Global Emerging Market Fund (0.4% return), Fidelity International Opportunities Fund (8.7% return); Tata Indo-Global Infrastructure Fund (-7.5% return) and BNP Paribas China-India fund with -3.4% return.

When they were launched, MoneyLife had pointed out that these funds were gimmicks. Our advice was to stay away from these funds. Sure enough, most of these global funds have reported poor returns since inception.

Global markets have been beset with many problems in the past three years-a financial meltdown in the US, debt troubles of European countries, Icelandic volcanoes, the fall and rise of commodity prices etc. Concerns over Greece's debt overshadowed the tottering finances of Portugal, Spain and Italy. Global funds have not been able to ride this volatility.

International mutual funds were launched with the objective to invest in non-domestic securities markets throughout the world. Investing in international markets provides greater portfolio diversification and let you capitalise on some of the world's best opportunities, was the rationale behind these funds.

Fund managers believe that if investments are chosen carefully, international mutual funds may be profitable when some markets are rising and others are declining. How far is it true?

Funds that put your money in other countries don't necessarily offer another round of diversification. In fact, markets in countries around the world move in sync. In 2009-2010 (financial year), the Sensex was up by 77% while the MSCI Emerging Markets Index was up 74%. In 2010-2011, the Sensex was up by 10%, whereas the MSCI index was up by 14%. Non-correlated market movement is not easy to find. Indeed, this idea is a myth. This is because an enormous pool of global capital is sloshing around the world looking for a slightly higher return. Besides, funds are known to chase hot ideas and a hot market may burn their performance-sorry, your returns. You are exposed to all kinds of risks unique to different countries, plagued with their own set of issues.

Moneylife pointed out in an article (dated 3 June 2010) saying "Global funds are pure fads. When the commodity markets are shooting up, fund companies will launch commodity-focused equity funds. When the Chinese market is hot, they will launch a China fund. Take, for example, the launch in December 2007 of the Franklin Asian Equity Fund, when the Asian markets were hot property among fund managers, what with the abundance of decoupling and other hackneyed theories. Since inception, the Fund has given a 5.3% return. There will also be one or two funds that do well-whether out of luck or skill. But there is little logic in investing in foreign funds-as a category they are worth the risk.




6 years ago

Two Points I would like to highligt after eading this article. -
1. Global Funds other than diversification should be looked as tactical allocation to portfolio. The idea of global funds is not to constantly outperform the other Indian funds in portfolio. A developed market fund will always tend to underperform an emerging market fund because of inherent growth in the resepctive economies. But that doesnt mean one should keep all funds in India and emerging markets. Look at the perfornace of any US based feeder fund for last 3 monhs, 6 months and even one year. They have hansonely beaten Sensex. The idea is to give a little allocation to these to the portfolio so that in times like these, they give stablity and kicker to the portfolio. This doesnt mean that this trend will continue. If one had git into a global fund last April/May, one should look to book profits from that around the same time.
2. Global Funds should be chosen with some ideas like low correlated markets. If you have an Indian Portfolio, then an emerging market portfolio may not make much sense as they have high correlation and would tend to move up and down the same way. (China is an exception at this point in time). China as a tactical call at this time makes sense. Else if u r in emerging markets, then a US based or US - Europe based fund makes more sense.
We should not outrihtly reject global funds. But investing in them tactfully and booking profit at right time will make a lot of sense rather than just gooing long.


6 years ago

Your view on MOST NASDAQ 100 ETF was positive, if I am not mistaken. So, going by your 'right' advance signal, should we go for this fund when listed ?

Aam Aadmi

6 years ago

Have you compared with the benchmarks indices of these funds?

How can you look at a 3 yr point to point performance and not an SIP Performance on the 3 years

International markets are at a low now and it makes sense to put money into global funds now

It could be a contra theme

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