Weak start to the week

Mon, 15 Mar 09:30 am

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The Indian markets have started today's session on a weak note. The benchmark indices opened near the breakeven mark, fell thereafter and have not managed cut their losses since then. Other key Asian markets are trading in the red with China (down 1.2%) leading the pack of losers. The US markets closed higher by 0.1% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading weak with banking stocks attracting investors' interest. However, select metal stocks are in the green. The BSE-Sensex is trading lower by around 62 points, while the NSE-Nifty is down by about 16 points. Selling interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.4% and 0.2% respectively. The rupee is trading at 45.59 to the US dollar.

Auto stocks have opened the day on a negative note. Losers here include Ashok Leyland and Escorts. As per a leading business daily, Tata Motors plans to increase the sourcing of vehicle parts from low-cost countries for its luxury brands Jaguar Land Rover (JLR). Almost a third of the components used could be sourced from India, China and Eastern Europe within the next 12 months. It may be noted that the company used to source about 15% of its components from low cost countries about a year back. Of late that figure has risen to 20%. These measures are a part of the company's aggressive cost reduction plan for its luxury car brands. Given that the company has taken expensive debt recently, it makes sense that it is trying to make its operations as competitive as possible. Countries like India have low cost skilled labour and cheaper raw material which give a 30% to 40% cost advantage on component prices.

Cement stocks have opened the day on a negative note. Losers here include Prism cement and Dalmia cement. As per a leading business daily, domestic cement sales have increased by nearly 8% YoY in February to 13.7 m tonnes. India's cement production grew by 9.5% YoY to 13.9 m tonnes. However, when compared to January, 2010 both sales and production fell in February. The increased off take in cement was experienced by almost all the leading players and is driven by demand from the realty and construction sectors. However, there continues to be a risk of crash in prices due to the massive capacity build up underway in the industry. Industry capacity is set to go up from 205 m tonnes per annum (mtpa) in FY09 to 270 mtpa by the end of the current fiscal.