Auto stocks drive markets

Tue, 1 Mar 11:30 am

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Indian indices continued their northward climb on buying interest in heavy weights during the last two hours of trade. All the sectors are trading in green led by autos and consumer durables.

The BSE-Sensex is up by 331 points while NSE-Nifty is trading 100 points above the dotted line. BSE Midcap index is up by 1.7% while BSE Small cap index is trading 1.2% over yesterday closing. The rupee is trading at 45.13 to the US dollar.

Auto stocks are trading firm led by Mahindra & Mahindra (M&M) and TVS Motors. As per a leading financial newspaper, M&M is planning to set up an automotive plant in Tamil Nadu. The government has already granted land and provided incentives for setting up this plant. The company plans to invest Rs 18 bn in Tamil Nadu which includes setting up a test track facility, an automotive plant and an R&D centre. The management of M&M informs that the company has been allocated a land of over 450 acres. The test track facility spread across 200 acre and the proposed automotive plant covering 250 acre will be an investment of Rs 12 bn. The test track will be used to test the products from the R&D centre as well as all of Mahindra’s manufactured vehicles. The R&D facility of the company has been set up at Mahindra World City near Chennai at an investment of Rs 6 bn.

It may also be noted that M&M is expected to benefit from the Finance Minister’s announcement of initiating a national mission for hybrid and electric vehicles in India. As a result of which, the company’s stock was trading firm yesterday and is amongst the top gainers today. It may be noted that M&M had acquired a major stake of 55.2% in Reva Electric Car Company in May 2010.

Cement stocks are trading firm led by Ultratech Cement and Prism Cement. As per a leading financial daily, the Budget move to reshuffle excise duty may push up retail prices by Rs 10-12 per 50 kg bag, thereby adding to the cost of construction. The Government’s move has come at a time when the cement industry has been finding it difficult to overcome the falling demand and rising input cost. It may be noted that the cement industry had registered a demand growth of just 2.6% in the December quarter against 7-8% in the same quarter last year. On the other hand, the industry has to deal with increase in input costs. For example, fuel cost has risen by about 30%, power tariff by 12-15% and freight cost by 10-12%.

While in the Budget, import duty on gypsum has been reduced, it is not expected to be of much help as cement companies source this domestically. However, reduction in petcoke import duty is expected to provide marginal relief. Furthermore, there has been an unexpected levy of 1% excise duty on fly ash, coal and lignite which is non-cenvatable.