Realty, auto stocks lead the losers

Mon, 22 Mar 01:30 pm

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The Indian markets once again slipped into the red as selling pressure intensified during the previous two hours of trade. Currently, selling activity is being witnessed in stocks across sectors led by realty, auto and metal spaces. Stocks from the healthcare and energy sectors have managed to garner the investors’ interest. Stocks from the telecom space are also amongst the key gainers.

The BSE-Sensex and the NSE-Nifty are trading lower, shedding around 100 points and 30 points respectively. The BSE-Midcap and BSE-Smallcap indices are trading in red, down by 0.5% and 0.2% respectively. The rupee is trading at 45.53 to the dollar.

Auto stocks are currently trading weak led by TVS Motor, M&M, Tata Motors and Maruti Suzuki. A leading business daily has reported that auto major Tata Motors has prepared a package which would help compensate its vendors, which had set up units at Singur. These were for servicing Tata Motors’ facility that was expected to be set up for manufacturing the Nano. However, as the company now has relocated its plant to Sanand, Gujarat, many of the vendors had no option but to relocate their units as well. While there is no official statement from the company, the compensation package is believed to be estimated at about Rs 2 bn (US$ 44 m). With this move, nearly 75% to 80% of the vendors’ incurred losses are likely to get recovered. However, at the same time, this compensation will not be in the form of cash. While these vendors are still in discussions on the nature of compensation, it is expected that Tata Motors would give options such as loans or higher prices for components as part of the compensatory package.

It must be noted that with the deadline of the production for the Nano likely to begin from next month (at the Sanand plant), the auto company would be doing all that it can to maintain its close relationships with its vendors. It is also reported that the company will not compensate its vendors in one go for their losses, but will do so in a phased manner.

Engineering stocks are currently trading mixed with Suzlon, Praj Industries and BHEL leading the pack of losers, while Voltas, Punj Lloyd and Crompton Greaves are trading firm. Engineering and construction major, Larsen & Toubro (L&T) has been awarded a contract worth Rs 9.8 bn from the Ministry of Defense. The scope of this order includes designing and manufacturing 36 high speed interceptor boats for the Coast Guard. This is part of the defense ministry’s initiatives to strengthen coastal security. These boats will be designed in-house at L&T's Ship Design Centre, which is part of its heavy engineering division. They will be constructed at the company’s shipyard at Hazira (Gujarat) and the new shipyard coming up at Katupalli near Ennore (Tamil Nadu).

It must be noted that L&T’s management has identified the defense sector as one of the key growth drivers for the company in the future. However, as of now the defense and shipbuilding segments of the company form a marginal part of the company’s order book