Consolidating in a narrow territory

Wed, 16 Feb 11:30 am

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After starting today's session on a marginally positive note in the morning Indian indices failed to gather any momentum and continued to trade in a narrow trajectory. Stocks from the metal and healthcare space are trading firm, while those from auto and realty space are trading weak.

Currently, the BSE-Sensex is down by 7 points while NSE-Nifty is trading 5 points below the dotted line. However, BSE Midcap and BSE Small cap indices are both up by 0.24% and 0.88% respectively. The rupee is trading at 45.45 to the US dollar.

Engineering stocks are trading mixed with Emco Ltd and Jyoti Structures leading the gains. However, Kalpataru Power and Cummins India are trading weak. Medical equipment company Opto Circuits is facing regulatory hurdles for entering the lucrative US and Japanese stent market. Entry into the US market is likely to take 2-3 years while for Japan it could be even longer. It may be noted that the company is already present in the US with the non-invasive product category like sensors and patient monitoring devices. Earlier the company had anticipated an entry into the US stent market by CY10 but considering that the process of getting an US FDA approval is cumbersome and expensive, the entire process has been delayed. It may be noted that getting an approval for one stent, including application and conducting clinical trials, cost about US$ 20 m. As both the US and Japanese stent markets are extremely lucrative Opto Circuits has been trying aggressively to get an entry there. If the company is successful in penetrating these markets in the immediate future it should accelerate the growth momentum.

IT stocks are trading weak led by Mahindra Satyam and HCL Tech. As per a leading financial daily, Tata Consultancy Services Ltd (TCS) has entered the business of offering cloud computing solutions to small and medium businesses or SMBs. TCS promises a saving of 30-40% in information technology spends for SMBs using this technology. The offering which has been in pilot phase for almost a year now serves around 130 clients. In the next 1 year, TCS wants to take up the number of clients served to at least 1,000. As per the company's spokesperson, while the revenues from this business presently are negligible, the company expects to generate sales of at least US$ 1 bn in 5 years time.

It may be noted that cloud computing combines individual hardware and software components to offer solutions that address specific requirements of SMBs. The SMBs pay for the services on a monthly basis as they would for a typical utility service like electricity or cooking gas. This would free the SMBs from the burden of having to maintain and update an in-house IT infrastructure that is always at the risk of becoming obsolete in the face of continuously evolving technology. TCS is entering a market that is getting increasingly crowded from a service provider perspective and is yet to see substantial business transactions in terms of technology adoption. However, parts of the world where IT infrastructure and spend is more mature has seen fast uptake of similar service offerings.