Banking, auto push markets higher

Mon, 18 Jan 01:30 pm

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The Indian markets continued to trade on a strong note during the previous two hours of trade. Currently, buying activity in sectors like banking and auto is helping markets stay in the positive. However, metal and realty sectors are finding it difficult to garner investors’ interest.

The BSE Sensex and NSE Nifty are trading in the positive, up by 120 points and 30 points respectively. Midcap and small cap stocks are also trading in the positive, up by 0.5% and 0.9% respectively. The rupee is trading at 45.59 to the dollar.

Ultratech Cement announced its 3QFY10 results recently. Its topline grew by merely 1.3% YoY. The growth was largely backed by a double digit growth in volumes. Operating profits declined by 10.9% YoY as costs continued to grow at a faster rate as compared to sales. A poor show at the operating level boiled down to the bottomline causing net profits to decline by 17.8% YoY. Further, the board of the company has approved the amalgamation of Samruddhi Cement Ltd and has also approved a share exchange ratio of 4 equity shares of face value of Rs 10 each for every 7 shares held in Samruddhi Cement of face value of Rs 5 each.

The demand for cement is expected to grow at the rate of 10% backed by government’s initiatives to boost rural, housing and infrastructural development. However, upcoming capacities have started exerting pressure on realisations. The planned new capacities are in the various stages of commissioning, which upon becoming operational will certainly result in downward pressure on margins. The industry is likely to witness excess capacity scenario over the next 18 to 24 months. Thus, going forward, those companies that are able to control costs better will have the competitive advantage.

As per a leading business daily, Power major NTPC's proposed joint venture with Nuclear Power Corporation of India (NPCIL) for setting up a 2,000 MW atomic power plant is likely get an approval from the Department of Atomic Energy (DAE) within the next 2 to 3 months. It may be noted that NTPC and NPCIL signed a Memorandum of Understanding (MoU) to form a JV for setting up nuke power projects in the country in December 2009 and are now awaiting approval. NTPC plans to add 2,000 MW of nuclear power by 2017. NPCIL will hold a majority stake of 51% while 49% will be held by NTPC. NTPC has formed a Nuclear Power Cell headed by officers trained at Bhabha Atomic Research Centre (BARC) for building capacity in this field. The company’s forays into nuclear energy are in line with its long term strategy of raising its capacity to 75,000 MW by 2017 through a mix of thermal, hydel and nuclear power. The stock of NTPC is currently trading flat.