Closing Bell 24-03-09

Closing Bell 24-03-09

India flat as Asia gains

The Indian markets lost a chunk of their gains during the final hour of trade on account of profit booking. However, they managed to close above the dotted line. The BSE-Sensex closed with gains of around 50 points, while the NSE-Nifty ended flat. However, stocks from the mid-cap and small-cap space ended the day in the red. Selling activity was witnessed in stocks across sectors, although some stocks from the banking and realty space found favour.

Most other Asian markets closed on a firm note. The European indices are currently trading mixed. Rupee was trading at 50.6 against the US dollar at the time of writing.

Software stocks ended the day on a weak note led by Patni Computers and Tech Mahindra. As per a leading business daily, Infosys has won an outsourcing contract worth about US$ 80 m to US$ 100 m from Telstra. It is believed that Telstra has scrapped IBM Global Services’ multi-million dollar applications support contract and now has handed it to Infosys. Amidst the economic slowdown, Telstra is consolidating its vendors to reduce its IT service providers from four (EDS, IBM, Infosys and Satyam) to two. Infosys’ capabilities and its good track record with BT has helped it in winning Telstra’s confidence. This contract would help the company increase its revenue share in the telecom segment and would also help strengthen its presence in the region. It may be noted that during 3QFY09 Infosys derived around 9% from the rest of the world segment.

Energy stocks ended the day on a mixed note with HPCL and BPCL ending firm, while Petronet LNG and Gail ended weak. As per a leading business daily, Reliance Industries is likely to sign a gas sale and purchase agreement with fertiliser companies in a few days. It is believed that the RIL’s KG basin gas of over 15 million standard cubic metres per day will be sold to about 12 fertiliser companies on priority. It may be noted that power and fertiliser companies are given the top slot in the national gas utilisation policy.

As per a leading business daily, India has witnessed an 11% power shortage during the eleven month period ending February 2009. A major shortfall of around 16% was experienced in the western regions including Maharashtra and Gujarat. Peak electricity generation lagged by almost 14% for the country during the same period under consideration. This can be attributed to the under utilisation of power plants on account of fuel shortage. It may be noted that many coal-based power plants are facing coal shortages, with inventory levels of few days or even less as compared to the industry norm of 15 days. It may be noted that with huge capacities lined up for the next couple of years, many power generation companies have been aggressive in acquiring coal mines abroad in order to assure the required supply.

OMCs up on bond issues

Though still in the positive territory, the markets have shed some of their earlier gains on account of profit booking at higher levels during the previous two hours of trade. Stocks from the banking, engineering and construction sectors are leading the pack of gainers, while select stocks from the energy, power, metals and telecom sectors are trading weak. The overall advance to decline ratio is poised evenly on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading higher, up by 115 points and 25 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading higher, up by 0.3% each. The rupee is trading at 50.54 to the dollar.

Energy stocks are trading mixed. While HPCL, BPCL and Indian Oil are trading higher, GAIL and Essar Oil are trading lower. As per a leading business daily, government had issued bonds of around Rs 100 bn to the public sector oil marketing companies (OMCs) viz BPCL, HPCL and Indian Oil in order to compensate for their under-recoveries on the sale of petroleum products during the current financial year. These bonds carry an 8% coupon rate and will mature in 2026. Indian Oil has been issued oil bonds of around Rs 58 bn, while BPCL and HPCL has been issued bonds worth of Rs 22 bn and Rs 20 bn respectively. It may be noted that OMCs are estimated to end FY09 with under recoveries of Rs 1039 bn. The value of total government bonds issued in this current fiscal stands at around Rs 710 bn, while upstream companies has absorbed under recoveries of around Rs 320 bn.

Engineering stocks are trading mixed. While BHEL and Blue Star are trading higher, Punj Lloyd is trading lower. As per the BSE announcements, Crompton Greaves board has approved an investment of upto Rs 2.3 bn in its group company Avantha Power & Infrastructure (APIL). This investment would represent nearly 41% stake in APIL. The investment will be made on the basis of book value wherein it is estimated to be around Rs 11 per share. It may be noted that APIL is engaged in generation, transmission and distribution of power. Thus, investment in the company is in line with the Crompton Greaves’ vision of expanding its presence in the power sector and thus provides an opportunity for forward integration.

Commodity stocks buck the trend

The markets gained further ground during the previous two trading hours on account of sustained buying activity across the index heavyweights. Stocks from the banking, engineering and construction sectors are leading the pack of gainers, while select stocks from the commodity pack are trading weak. The overall advance to decline ratio is poised at 2 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading higher, up by 250 points and 75 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading higher, up by 1.8% and 1.4% respectively. The rupee is trading at 50.28 to the dollar.

Capital goods stocks are trading firm led by Suzlon, Voltas and BHEL. As per a leading business daily, BHEL has formed a joint venture with GE Hitachi for building multiple designs of nuclear reactors. To begin with, GE will plan the necessary resources required in managing the construction of a nuclear power station. This development will help BHEL to strengthen its presence in manufacturing nuclear energy equipment, which currently accounts for a miniscule share of the company’s total revenue.

Auto stocks are also trading firm led by M&M, Bajaj Auto and Tata Motors. Tata Motors has launched the Nano yesterday. While the base model is priced at around Rs 134,000, the high end version is priced at around Rs 180,000. This is world’s lowest price car, next only to the base model of Maruti 800, which is priced at Rs 190,000 to Rs 200,000. The company expects to sell around 100,000 cars by FY10. However this won’t strengthen Tata Motors’ topline a great deal, as it will constitute only 3% of the company revenues. Hence, unless the company sells around 400,000 to 500,000 cars per annum, which not likely for the next 3 years, the development will hardly make any difference to the company

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