Realty stocks remain out of favour

Tue, 16 Feb 01:30 pm

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Strong buying activity led the Indian indices to rise into the positive territory during the previous two hours of trade. Stocks that are currently preferred by investors are those forming part of the healthcare, metal and IT spaces. The BSE-realty index is the only sectoral index that is trading in the red. Currently, there is one gainer for every loser on the overall BSE.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 90 points and 25 points respectively. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.2% and 0.4% respectively. The rupee is trading at 46.14 to the dollar.

Capital goods stocks are trading firm led by Siemens, BHEL, and Punj Lloyd. Gains in the sector heavyweights are on the back of news of few companies bidding for a large Rs 450 bn bulk equipment tender floated by NTPC and Damodar Valley Corporation (DVC). A leading business daily has reported that engineering majors such as BHEL, L&T, and Bharat Forge have put in bids through their respective joint ventures. BHEL-Alstom and L&T-Mitsubishi were among the few companies that bid for both - the supply of supercritical boilers for 11 units of 660 mw (megawatts) each and turbine generator sets. On the other hand, the JV between Alstom-Bharat Forge and Toshiba-JSW bid for only the turbine generator package.

It must be noted that the Chinese and Korean power equipment majors such as Doosan, Shanghai Electric and Dogfang Electric (either on a standalone basis or through joint ventures with non-Indian firms), which have been giving a tough time to domestic power equipment manufacturers were not allowed to submit their bids. This is on the back of the Indian government making it mandatory for bidders to have a joint venture with an Indian company or a 100% Indian subsidiary to become eligible to bid for projects. In addition, they are also required to supply equipment that is manufactured in India.

Auto stocks are currently trading firm led by Tata Motors, TVS Motor and M&M. A leading business daily has reported that auto major, M&M along with BAE Systems Plc is looking to invest nearly US$ 21 m or about Rs 990 m over a three year period in a joint venture (JV). M&M will hold 74% stake in this in venture, which has been formed to make defense equipment. As per the company this joint venture company will employ about 100 people in a manufacturing facility at Faridabad near New Delhi.

In another development concerning M&M, the company is looking to launch new two-wheelers models and variants in the market this year. In the gearless scooter segment, the company is looking at revamping and launching a model which it had inherited from Kinetic Group, which it acquired recently. As for the motorcycle segment, M&M is believed to be in the process of identifying the line up for motorcycle models. As per the company’s management, launches in this segment are likely to happen by the end of this year in the mid and high market segment. The company believes that it would be able to make a dent in the market with its launches. However, in both the segments - gearless and motorcycles - the company will have to face very well established players such as Honda Motorcycle & Scooters, TVS and Suzuki in the gearless space and players such as Hero Honda, Bajaj Auto and TVS in the motorcycles segment.