Indian mkts lead the Asian pack

Wed, 31 Mar 09:30 am

   Previous Close   

   Pre-Open   

   11:30 am   

   01:30 pm   

   Closing   

The Indian markets have started today's session on a strong note. The benchmark indices quickly marched into the green right from the start and have held 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 marginally higher yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading in the green with auto, consumer durables and realty stocks attracting investors' interest. The BSE-Sensex is trading higher by around 80 points, while the NSE-Nifty is up by about 20 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 0.6% and 0.8% respectively. The rupee is trading at 45.10 to the US dollar.

As per a leading business daily, the telecom department plans to levy a 2% R&D cess on mobile bills in order to boost manufacturing of indigenous telecom equipment in India. If implemented, this would further burden the mobile users who are already paying 12% service tax and 2% education cess on their mobile bills. The levy of R&D cess would increase the share of indigenous telecom equipment which has fallen dramatically from FY 2004 and reduce security threat posed by the imported hardware. We believe, although the levy of R&D cess will create a hole in the subscribers pocket by increasing their mobile bills, the move is likely to transform India into telecom manufacturing hub. However, for Indian telecom companies like Bharti Airtel, the effect of this move should be negligible.

As per a leading business daily, cement manufacturers are likely to increase prices third time in a row this year to undo the jump in input costs. The hike in prices would be to the extent of Rs 7 per bag. Input cost such as coal has witnessed a sharp jump, which has led to higher cost of production. Moreover, freight charges have also gone up. In the cement industry rise in cost is generally a pass through. Thus, this hike in prices is said to be more a result of higher cost of production and transportation. The Indian cement industry is growing at the rate of 8% to 10%. The hike in prices is less likely to impact dispatches in the near term considering the strong demand for the commodity. The government's increased focus on infrastructural activity is likely to sustain the demand growth.

We believe that prices may stay firm in the near term owing to strong demand. We expect cement industry to sustain this kind of volume growth. However, once the planned capacities become operational there might be some pressure in the medium to long term on cement prices. As per Cement Manufacturers' Association, about 110 m tonnes (MT) of cement capacity would be added to the existing capacity of 240 MT over the next three years. Cement stocks are currently trading higher led by Madras Cements and JK Lakshmi Cements.