Realty drags the bourses

Thu, 10 Mar 09:30 am

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Asian markets have opened the day on a weak note. Benchmark indices in Japan (down 1.1%), China (down 1.0%) and Korea (down 0.9%) are leading the losers' pack. Like its Asian peers, the Indian stock markets too have opened the day in the red. Realty and banking stocks are the biggest losers currently.

The BSE-Sensex is trading lower by around 125 points (0.7%), while the NSE-Nifty is down by around 35 points (0.6%). Midcap stocks are trading in the negative as well, with the BSE Midcap index down by about 0.1%. However, small cap stocks are witnessing buying interest and the BSE Small cap index is up by about 0.1%. The rupee is trading at 45.07 to the US dollar.

Higher input costs have hit almost all the companies in India. This has resulted in the need for optimizing and rationalizing costs. The latest to join the bandwagon is the specialty packaging company Essel Propack. The company has decided to shut down two of its plants each in US and Egypt. It has also decided to consolidate its operations in Europe. The main reason for this is to optimize the costs and to streamline its operations in line with its clients. As per the company's MD, Mr. Ashok Goel, such a move would help the company in saving costs as it helps remove several trade barriers. The company is also looking to reduce its debt through financial restructuring. The company has recently divested its stake in its US based medical business and has used the proceeds to reduce its debt. Its current debt levels are approximately Rs 8,500 m. The company's stock is currently trading in the green.

Telecom stocks have opened the day on a weak note as well. Reliance Communications has finalized a ten-year US$ 1.93 bn loan from Chinese banks. China Development Bank has underwritten the loan and is part of a consortium of Chinese banks providing funding. This is the largest ever loan between the two Asian economies. The debt-laden telecom company will use US$ 1.33 bn to refinance the expensive 3G spectrum fees. The remaining will be utilised to import Chinese telecom equipment from Huawei and ZTE. According to the company, it would save more than Rs 5 bn in interest costs annually because of this loan.

Reliance Communications has to reduce a huge pile of debt worth US$ 7 bn ahead of a major bond redemption next year. Last year, the company had attempted in vain to sell a 26% stake in itself to reduce debt. A plan to float its tower unit in an initial public offering also failed to take off. The company's stock is currently trading in the red along with that of peers Bharti Airtel and Idea Cellular.