Metal, realty stocks lead the gains

Thu, 6 Jan 09:30 am

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Asian markets have opened on a mixed note today. While stocks in Japan (up 1.2%) and Singapore (up 0.4%) are seeing buying interest, those in China (down 0.4%) and Hong Kong (down 0.1%) are facing some selling pressure. The US markets closed with a 0.3% gain yesterday. As for the Indian markets, these have also opened in the positive today. Metal and realty stocks are witnessing buying interest currently.

The BSE-Sensex is trading higher by around 75 points (0.4%), while the NSE-Nifty is up about 25 points (0.4%). Mid and small cap stocks are also trading with gains, with the BSE Midcap and BSE Small cap indices up by 0.4% apiece. The rupee is trading at 45.39 to the US dollar.

Auto stocks have opened today on a mixed note. While gains are seen in Bajaj Auto and Maruti, selling pressure marks trading in TVS Motor and Ashok Leyland. Tata Motor's Nano problems are getting bigger now. First it was the case of burning engines, then it was lacklustre demand, and now it's the issue of initial buyers not being interested in taking delivery of the car. The company had selected 155,000 customers through a lottery system in 2009 for the delivery of the car in two phases. The delivery of the first 100,000 units was scheduled to be over by 2010. But since the despatches started in July 2009, the company has been able to deliver just 77,000 cars. Anyways, not all seems bad though. After a dismal show in November 2010 when Tata Motors sold just 509 units of Nano across India, December brought about some respite. The month saw sales volumes shoot up to around 5,000 units. A combination of promotional offers, better incentives, and easy financing was the result behind the better show in December. It would now be interesting to see if this growth is able to sustain in the coming months as well.

Engineering stocks have also started the day on a mixed note. Voltamp and BHEL are leading the gainers' pack. On the other hand, Areva T&D and Punj Lloyd are facing selling pressure. As per a leading business daily, the management of Suzlon has denied reports of a stake sale to Spanish wind-power equipment major Gamesa. It was reported a couple of days ago that Suzlon's promoters, the Tanti family, were looking to sell their stake in the company to Gamesa. The family owns 58.1% stake in Suzlon. The company is facing severe losses and significant balance sheet pressure. Till about a couple of years ago, Suzlon seemed to be doing well - growing fast, raising capital for future growth, and making large scale acquisitions. But then, starting 2008, the company has faced one problem after another. Its wind-power equipments started breaking down. Customer complaints piled on. Some of them even cancelled ongoing contracts. Its balance sheet got highly stretched (debt equity currently stands at around 2 times), as cash flows dwindled. Overall, the company's financial position went from bad to worse. Suzlon's stock took a severe beating, and has still not recovered its losses. Instead, investors continue to bleed as the company's performance is getting worse by the day. The stake sale, if it actually comes through, will be a good way to restructure the business and bring it back on line.