Sensex slips into the red

Wed, 24 Feb 11:30 am

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he Indian markets continued to remain extremely volatile, dragging the benchmark index below the dotted line during the previous two hours of trade. Currently, selling activity is being witnessed by stocks from the auto, consumer durables, metal, banking and healthcare sectors. Nevertheless, stocks from the FMCG, oil and gas, capital goods and power sectors are managing to garner investors’ interest.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 15 points and 9 points respectively. Stocks from the midcap and small cap spaces are currently trading in the red, with the BSE-Midcap and the BSE-Smallcap indices trading lower by 0.6% each. The rupee is trading at 46.24 to the US dollar.

According to a leading business daily, electrical equipment manufacturer, Havells India is scouting for acquisitions in China in order to expand its footprint in the area. The company is looking for appropriate acquisition targets and hopes to finish the acquisition within one year. Other than China, the company also has plans for inorganic growth in ASEAN countries and also Latin America in the next six months. The company plans to fund these acquisitions through its internal accruals and is looking at targets of the size of Rs 4.5 bn.

It may be noted that Havells India recently introduced Ceramic Metal Halide (CMH) which is new generation lighting based on a technology which produces the closest substitute of natural light. Given the company’s strong focus towards not only increasing its topline but also profitability and its ongoing successful restructuring of its overseas subsidiary, its plans for further expansion are welcome.

According to a leading business daily, REpower Systems, a 90.71% subsidiary of Suzlon Energy has won 51 MW order from a French firm, Akuo Energy S.A.S. This includes three agreements to supply 25 wind turbines. REpower’s French subsidiary which will execute this order and will be responsible for delivery, commissioning and service of the turbines. Suzlon’s management is upbeat about the order as it believes that France is a very important market for the wind industry and such strategic alliances will aid the company in strengthening its presence in the region. It may be noted that REpower Systems saw a 14% YoY rise in sales during 3QFY10, and a 73% YoY rise in operating profits during the same period, mainly on account of an expansion in EBIDTA margins. However, Suzlon as a whole registered a 20% YoY decline in topline as well as operating profits. Suzlon's weak balance sheet along with poor operating performance makes us cautious of the stock.