Metals and autos drag the indices

Fri, 14 Jan 09:30 am

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Asian markets have opened the day in the negative. Benchmark indices in Indonesia (down 0.9%), China (down 0.9%) and Singapore (up 0.5%) are the biggest losers. However, markets in Hong Kong (up 0.4%) are trading in the positive zone. Indian markets have opened the day in the negative as well. Metal and auto stocks are the biggest losers.

The BSE-Sensex is trading lower by around 77 points (0.4%), while the NSE-Nifty is down by about 19 points (0.3%). Mid and small cap stocks are trading in the negative as well with the BSE Midcap and BSE Small cap indices down by about 0.2% and 0.1% respectively. The rupee is trading at 45.19 to the US dollar.

Tobacco major VST Industries announced its third quarter results yesterday. Sales for the company increased by 9% YoY, while profits grew by a whopping 50% YoY. The sales were boosted by the robust demand for cigarettes during the quarter. They were also supported by the price hikes that the company had undertaken for its products. Operating margins improved by 9% YoY during the quarter. This was mainly on account of lower raw material costs. However, the decline in raw material costs was slightly offset by a marginal increase in other expenses. Better operating margins boosted the net profits during the quarter. The net income was however impacted by higher tax rates during the quarter. Effective tax rate stood at 32% as against 30% during the same period last year. The stock of the company is trading in the green along with peer Golden Tobacco. However, the stock of ITC is witnessing selling pressure.

The cement sector is all set to see increased competition. Reliance Industries (RIL) has announced its plans to enter into the cement sector. In line with this, the company has signed an agreement to invest in a 5 m tone cement project in Gujarat. The company has not given out the cost of investment for the project. However, industry experts feel that a project of this size could cost the company anywhere between Rs 100 bn to Rs 150 bn. With RIL entering the sector, we can definitely expect an increase in capacity. The sector has already been reeling under the effect of oversupply and logistic issues.

RIL has signed the MOU with the Gujarat government. It is part of the Rs 702 bn investment intent announced by the company for the state. RIL plans to invest Rs 400 bn in its Jamnagar refinery project. It also plans to invest Rs 150 bn at the petrochem complexes at Dahej and Hazira. The stock of the company is currently trading in the red.