Markets up on Asian cues

Fri, 12 Mar 09:30 am

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The Indian markets have started today's session on a positive note. The benchmark indices opened above the breakeven mark and have managed to hold on to their gains since then. Other key Asian markets are trading in the green with Japan (up 0.4%) leading the pack of gainers. The US markets closed higher by 0.4% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with auto and banking stocks attracting investors' interest. The BSE-Sensex is trading higher by around 41 points, while the NSE-Nifty is up by about 10 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.6% respectively. The rupee is trading at 45.5 to the US dollar.

Auto stocks have opened the day on a strong note. Gainers here include Eicher Motor and TVS Motor. As per a leading business daily, M&M is planning to pick up a majority stake in International Cars and Motor (ICM), which makes the Rhino brand of SUVs. The SUV range was designed in collaboration with MG Rover, UK and with engines sourced from Isuzu, Japan. ICM has an installed capacity to manufacture 24,000 units a year. It is part of the Delhi based Sonalika Group which holds 70% in the company. The balance is held by private equity players. In our view, the deal makes sense for M&M as Rhino is a ready product that needs better marketing and distribution. Moreover, ICM's factory in Himachal Pradesh is entitled to a 10 year holiday from excise and income tax. However, the key issue for M&M will be valuation. In fact, talks between the company and the Sonalika group have been on for a few months but are stuck on the question of valuation.

Banking stocks have opened the day on a positive note. Gainers here include Allahabad Bank and Dena Bank. As per a leading business daily, the government has asked all public sector banks (PSBs) to follow a reservation policy for SC STs at all officers' categories. They have to promote at least 15% SC and 7.5% ST candidates from the level of probationary officer to general manager. The rule comes after the Madras High Court asked five PSBs to implement reservations. These PSBs include Canara Bank, UCO Bank and Union Bank of India. In our view, although there is a case for affirmative action for the marginalised sections of society, this decision will increase the manpower woes of PSBs. Banks are facing a talent crunch at the senior levels due to retirements. In fact, banks have already approached the Supreme Court looking for a stay order against the High Court ruling.