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Out of the 49 sectors, sugar, the hot sector of late 2009, was the worst performer, crashing 22% whereas printing & publishing was down 21%
Between 6 January 2010 and 19 February 2010, Indian markets have been highly volatile for a variety of reasons. There were fears of Indian government ending the stimulus package; sovereign debt problems in Europe; concerns that rising food inflation would force the Indian central bank to push up rates; China’s surprise move to restrict bank lending to cool its economy; and the US Federal Reserve’s surprise move to increase the discount rate. During this period, the Sensex plunged 9% (down almost 1,500 points). But how have the Moneylife sectors suffered in this decline?
Out of the 49 sectors, sugar, the hot sector of late 2009, was the worst performer, crashing 22% whereas printing & publishing was down 21%. Indian government’s move to reduce sugar stock holding limit from 15 days to 10 days for bulk users has triggered a wave of selling in sugar stocks. Also, India needs to urgently import 3-5 million tonnes of white sugar due to tighter supply situation than previous estimates. This has weighed on market sentiments, mainly due to the stronger dollar which is expected to impact margins of the sugar companies.
ML Real Estate sector suffered after the central bank increased the cash reserve ratio by 75 basis points at its quarterly policy review. The sector declined 19% in the above period. Telecom and Office Equipments sectors plunged 13% each.
Telecom sector declined on back of index heavyweight Bharti Airtel’s massive slump following the company’s expensive bid to take over the African assets of Kuwaiti telecom player Zain for $10.70 billion.
Airlines, Energy and Hotels were the next worst-performing sectors as they declined 12%, 11% and 10%, respectively.
Among the best performers was Farm & Farm Inputs (up 10%), gaining massively after the Indian government eased controls on several fertilisers and raised prices of the popular urea nutrient by 10%. This move has now raised hopes of more reforms and lower subsidies in the Union Budget 2010-11 resulting in higher margins for fertiliser producers. Among the other sectors that bucked the downtrend were Healthcare and Paints which were up 2% each.
For oil markets, it as if the Great Recession never happened. Surging demand in China, India and the Middle East is making up for decline in the debt-crippled West, ensuring another global crunch within three or four years. Bank of America and Barclays Capital, two leading oil traders, have told clients to brace for crude above $100 (£64) a barrel by next year, before it pushes relentlessly higher over the decade.