Metal, IT stocks keep markets firm

Mon, 22 Feb 11:30 am

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The Indian markets continued to see some traction as buying persisted during the previous two hours of trade. The market sentiment is optimistic currently as the overall advance to decline ratio is poised at 1.8 to 1 on the BSE. Stocks across sectors have managed to garner investors' interest, with those from the metal, IT, and banking spaces leading the pack of gainers. Stocks from the healthcare and FMCG spaces are amongst the lower gainers at present.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 190 points (1.2%) and 55 points (1.2%) respectively. The BSE-Midcap and BSE-Smallcap are also trading firm, up by around 0.7% each. The rupee is trading at 46.16 to the dollar.

Telecom stocks are currently trading firm led by Bharti Airtel, MTNL and Reliance Communications. Telecom major, Bharti Airtel is believed to have lined up funds to the tune of US$ 9 bn for the proposed acquisition of Zain Telecom's African assets. It must be noted that there is however no official statement from the company. It is believed that the company will take on this debt in the form of long-term loans, of which a major portion will be from foreign banks. A key reason for the company planning to fund this acquisition through debt is on the back of its balance sheet being under-leveraged at present.

This does indicate that the management has not opted for capital raising through the equity route. This could be on the back of the investing community indicating that it is not in favour of this deal as Bharti's stock dropped sharply during the previous week. It may be noted that the senior management of the company recently gave its views on the reaction that the stock received once the company announced its buyout plan. Mr. Sunil Mittal, Chairman of Bharti recently spoke to a business daily stating that Zain is a better fit for the company (as against MTN). This is mainly due to the fact that Bharti would get control over Zain's operations as opposed to the deal that was being signed with MTN wherein there would be a partnership between the two companies.

As per a leading business daily, BHEL is planning to sign a technology transfer agreement with European company Sheffield Forgemasters this week. This will give BHEL access to Sheffield Forgemasters' technology which will help it upgrade its manufacturing of castings and forgings at its Hariwar plant. In effect, it will enable BHEL to manufacture new and improved castings and forgings. Consequently, it will help BHEL consolidate and improve on its core prowess of building quality power equipment, as castings and forgings are key components in power equipment. Further, the company is planning to invest Rs 6 to Rs 8 bn in this venture. Engineering stocks are currently trading firm led by Alfa Laval, Punj Lloyd and ABB.