Markets begin on a weak note

Thu, 11 Mar 09:30 am

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The Indian markets have started today's session on a weak note. The benchmark indices opened below the breakeven mark, moved into the positive territory but have slipped back into the red since then. Other key Asian markets are trading in the red with China (down 0.6%) leading the pack of losers. The US markets closed marginally higher yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading a mixed bag with software and power stocks attracting investors' interest. However, select FMCG and auto stocks are in the red. The BSE-Sensex is trading lower by around 9 points, while the NSE-Nifty is down by about 6 points. However, buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.1% and 0.2% respectively. The rupee is trading at 45.44 to the US dollar.

Steel stocks have opened the day on a weak note. Losers here include Tata Steel and SAIL. As per a leading business daily, Tata steel is facing difficulties in implementing its decision to mothball Corus' Teesside plant. The decision was taken after the company had to operate the plant at severe losses as buyers walked away from their long term contracts. The company has also found it difficult to rope in strategic investors to help tide the slump. The decision to mothball the plant is now facing opposition from the workforce who are weary of job losses given the poor state of the local economy. In fact, they are considering an agitation. In our opinion, this highlights the sharp contrast in the fortunes of the steel industry in the West and the emerging markets. At a time when everyone in China and India speaks about capacity expansion, existing plants in the west are on life support. Since, a major portion of Tata Steel's operations are now located in Europe, it will have to cope with these problems.

Energy stocks have opened the day on a positive note. Gainers here include Petronet LNG and Reliance Industries. As per a leading business daily, Reliance Industries has leased a new ultra-deepwater rig under a five year contract. The lease rental of the rig is US$ 495,000 per day for the first six months of the contract and US$ 510,000 per day after that. The rig will be deployed in the eastern offshore region. It may be noted that the company's biggest oil and gas discovery, the KG basin D6 block is located in this region. The availability of rigs becomes a constraint for oil explorers once oil prices start moving upwards. In fact, per day rentals of rigs had touched unprecedented levels once oil prices crossed US$ 100 per barrel in the early part of 2008.