Author: CP

Automobile sales saw very high y-o-y sales growth in December [but lower than Novermber-2009], benefiting from economic recovery, improving bank financing and a low comparison base. Two wheeler sales are benefiting from strong farm income and a revival in urban sales.

Here is the Sales Snapshot YoY increase for the Month of December [NOTE – December 2008 can be termed as a Low Base Effect]

• Hero Honda – 74%
• Bajaj Auto – 77%
• TVS Motors – 34%
• Maruti Suzuki – 50%
• Mahindra & Mahindra – 100%
• Tata Motors – 104%

The impact of an excise duty hike should be the least on two wheeler makers as they have about one-third of production coming from factories situated in tax havens. Also, two wheeler makers have taken various price hikes in the last year to protect margins, which gives us confidence that they should be able to protect margins by taking further price hikes, in the event that input costs start rising.

India’s balance of payments (BOP) projections for 2QFY10E suggest that the current account deficit (CAD) is set to widen to over 3% of GDP from little over 2% in 1QFY10. Kotak expects trade gap to widen to US$29.8 bn in 2Q from US$26 bn in 1Q and CAD to widen to US$9.2 bn in 2Q from US$5.8 bn in 1Q.

Given the large discrepancy between RBI and DGCIS data on foreign trade, the trade gap could contain potential surprises. The discrepancy had widened sharply to nearly US$14 bn for 1QFY10 data, 2.4X of the current account gap itself, making reliable projections difficult.

Strong foreign investments likely to strengthen capital account – net FII inflow of over US$ 8 bn. Banking capital likely turning positive with US$3 bn inflows in 2Q versus outflow of US$3.4 bn in 1Q. Capital account had turned positive in 1QFY10 after US$9.6 bn of net outflows in the two preceding quarters.

Update:
The current account deficit increased significantly to US$12.6 bn (4.2% of GDP, annualized) in QE-Sept 09 compared with a deficit of US$5.9bn in QE-June 09. The market was expecting a current account deficit of US$5.6bn in QE-Sept 09. The current account deficit (excluding remittances) widened to 8.8% of GDP, annualized, in QE-Sept 09 compared with 6.4% of GDP in QE-Jun 09. On a trailing 4Q basis, current account deficit remained stable at 2.25% of GDP as of QE-Sept 09 from 2.3% of GDP as of QE-Jun 09.

Corporate learning solutions continue to show diverging trends with discretionary spend items namely, custom content and print learning products remaining soft. With 50% revenue coming from these two segments, prospects for the segment remain muted.

Momentum in government school sign-up has ebbed after a strong start to the year. However March quarter is usually a strong quarter for school additions and NIIT hopes to get a fair share of the current school pipeline. NIIT is also exploring opportunities in public private partnerships in model schools and skills enhancement. NIIT has ceded leadership in private schools to competitors.

NIIT has changed its strategy and is transitioning itself from an IT training firm to a full services training company.