Metal, IT stocks weigh on markets

Fri, 11 Mar 11:30 am

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Indian stock markets continued to trade weak on the back of profit booking in heavy weights over the last two hours of trade. Stocks from the metals and IT space are trading weak while stocks from the FMCG and realty space are trading firm.

The BSE-Sensex is down by 32 points while NSE-Nifty is trading 13 points below the dotted line. Both BSE Midcap and BSE Small cap indices are trading flat. The rupee is trading at 45.16 to the US dollar.

Food stocks are trading firm led by Tata Global Beverage and Tata Coffee. As per a financial daily, Nestle India has indicated that it would be investing close to Rs 15 bn over the next 2-3 years in expansions. Of this, the company plans to invest Rs 3.6 bn in their new factory at Naniangud in Karnataka. This factory started operations in March 2010. However, Nestle is increasing production capacity of a further 20% at this site. Other than this factory, Nestle also plans to invest Rs 6 bn in its green field facility in Haryana. This facility is expected to commence operations by the end of 2011. Furthermore, the company expects to invest a further Rs 2 bn in its chocolate manufacturing plant in Punjab. For its noodles and confectionary business the company plans to invest Rs 12 bn for setting up two manufacturing facilities. One of these facilities will be in Goa and the other would be in Himachal Pradesh. Nestle India also plans to invest US$ 50 m to set up a R&D facility in Karnataka. As per a company spokesperson, Nestle is seeing demand in the country which it is unable to meet. For this reason the company is investing to ramp up its production facilities.

Banking stocks are trading mixed with Bank of Maharashtra and Canara Bank trading in the green while Kotak Bank and City Union Bank are trading in the red. As per a leading financial daily, public sector bank, State Bank of India is looking at acquisitions in Africa and South East Asia. It is likely to spend US$ 200 m on each of its global acquisitions. The global meltdown has resulted in the bank going for small deals as compared to larger acquisitions eyed earlier. SBI has chosen these locations because of the tremendous opportunities available there as a result of rising interest of cash-rich Indian companies expanding there. The banks in these two regions with strong corporate banking services will be considered as target buys.

It may be noted that SBI has been quite aggressive in expanding its overseas operation and is aiming at increasing the share of the international operations to the group net profit from the existing 16% to 25% over the next five years. The company has plans to expand its reach to Malaysia, Brazil, South Korea, Saudi Arabia and Qatar this year. This will take its presence to 37 countries worldwide.