IT, energy stocks lead gains today

Mon, 13 Jan Closing

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Indian stocks were in favour throughout the day, with gains only strengthening towards the end. The BSE-Sensex closed higher by about 375 points or 1.8%, while the NSE-Nifty ended higher by about 100 points or 1.6%. BSE Mid Cap and BSE Small Cap ended the day on a firm note as well with their respective indices up by about 1.4% and 0.15% respectively. Stocks from the information technology, oil and gas and banking spaces led the pack of gainers today.

Stock markets in other parts of Asia closed on a firm note with Hong Kong and Japan up by about 0.2% and 0.2% respectively, while China ended lower by about 0.2%. The rupee was trading at Rs 61.52 to the dollar at the time of writing.

Stocks of steel companies ended the day on a mixed note with Jindal Saw and Tata Steel leading the gains while Steel Authority of India (SAIL) and JSW Steel ended the day on a weak note. As per a leading business daily, Tata Steel witnessed a 9.4% jump in sales to 2.06 mn tonnes during 3QFY14 from 1.88 mn tonnes in 3QFY13. As cited by the management, the saleable steel production grew 3.9% YoY to 2.15 mn tonnes during the third quarter. The crude steel production surged 3.7% to 2.16 mn tonnes while hot metal production inched up by 1.6% to 2.3 mn tonnes. We believe domestic operations would continue to be the earnings driver for Tata Steel over the next two years. The company is expected to do well over the medium term largely due to the new capacities (2.9 mtpa) coming on stream. Also, its restructuring exercise in Europe coupled with the marginal revival in demand in the region is expected to help the company improve on its performance going ahead.

Stocks of auto ancillary companies ended the day on a mixed note with Exide Industries closing on a weak note and NRB Bearings, FAG Bearing and Bharat Forge leading the pack of gainers. Auto ancillary major Bharat Forge was in the news today on the back of the company divesting its 51.85% stake in its Chinese joint venture. The company has sold off stake to its partner China FAW Corporation Limited. As per the company, it would be receiving a sum of Rs 1.75 bn or US$ 28.2 m for its share. This would bring an end to its eight year old JV in the country. The stock ended up higher today seemingly on the back of this announcement. As per the company, this development would help it improve its cash flows as well as profitability. In the six month period ended September 2013, the company's standalone revenues and profits were lower by 9% YoY and 10% YoY respectively. While interest costs came in lower on a YoY basis, the higher absolute value of the same coupled with depreciation costs hampered the otherwise improved performance (in terms of margins) at the operating levels.