Red marks all over

Fri, 7 Jan 11:30 am

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Indian indices are trading weak on account of profit booking in heavy weights over the previous two hours of trade. Stocks from the auto and consumer durable space are the biggest losers, while stocks from the realty and power space have lost the least.

The BSE-Sensex is down by 143 points, while NSE-Nifty is trading 46 points below the dotted line. BSE Midcap is trading down by 1.1%, while BSE Small cap index is trading 1.2% below yesterday's closing. The rupee is trading at 45.39 to the US dollar.

Auto stocks are trading weak led by Ashok Leyland and Escorts. As per a leading financial daily, Tata Motors has entered the 4-axle construction truck market with the launch of its Tata Prima Construck range. The price of this truck ranges from Rs 3.3–4.0 m. Tata Motors with this launch joins the ranks of Mercedes, Volvo and Man Force Trucks as the only companies offering 4-axle construction tippers in India. As per the company's strategy, distribution of the Tata Prima Construck range will start with select customers in Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Delhi, Chhattisgarh, Orissa, West Bengal and Jharkhand. Moreover, for an easy induction of this truck in the customer's fleet, Tata Motors will train the driving crew of its customers at its manufacturing facility in Jamshedpur. The company's service network has already been geared to support the new truck.

As per Tata Motors, the demand for construction trucks in India is huge and is majorly driven by increasing construction and mining activities. In fact, the company is in the process of expanding its product portfolio in the construction equipment segment. In 2009-10, Tata Motors sold 23,000 construction trucks out of the 115,000 M&HCVs sold during the same period. The prospects for the construction truck business look bright as the company sees a growth of around 25% year on year in this segment.

NBFC stocks are trading weak with IFCI and IndiaBulls Financial Services leading the pack of losers. PFC is likely to come out with a 20% follow-on offer (FPO) by 15 May 2011 to raise about Rs 70 bn. The government plans to divest 5% stake in the company via the FPO while the balance amount will be raised by issuing 15% fresh equity. It may be noted that government currently holds 90% stake in the firm and had already divested 10% via an IPO in 2007.

Separately the company also plans to launch tax-free infrastructure bonds worth Rs 60 bn to retail investors by the end of the month. For this, the company has already received an approval from the finance ministry. The minimum tenure of these bonds will be 10 years, with a lock in of five years for the investors. Proposal to raise money via tax free infrastructure bonds was introduced in the recent budget. It may be noted that in India there are only two niche power finance institutions – REC and PFC. However, both of them do face funding constraints in terms of lending to the power sector due to the lack of cheaper source of long term finance. In such a scenario allowing these power finance institutions to raise long term money via infrastructure bonds should ease funding constraints to some extent.