IT, auto stocks drag markets lower

Thu, 7 Apr 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

Indian stock market indices continued to trade in the negative led by selling across index heavyweights during the last two hours of trade. Stocks from the FMCG and realty space are trading firm and those from the IT and auto space are trading weak.

The BSE-Sensex is down by 50 points while NSE-Nifty is trading 16 points below yesterday's closing. BSE Midcap and BSE Small cap indices are up by 0.8% and 0.9% respectively. The rupee is trading at 44.24 to the US dollar.

Hotel stocks are trading firm led by Taj GVK and Hotel Leelaventure. As per a leading financial daily, Indian Hotels is planning to introduce a new hotel brand. The hotel company currently operates in the five star segment, four star segment, three star segment and budget hotels under its brands Taj, Vivanta, Gateway Hotels and Ginger respectively. With this new brand it wants to get into the mid-scale segment of the hotel industry. Indian Hotels is also looking to consolidate its foreign properties in the US, UK and the Middle East under one holding company. As per management, this is a time consuming process and is likely to get completed in the next 18-24 months. By 2015, the company is expecting revenue of US$ 2 bn. The hotel company also aims to increase its room tally in India from 13,250 to 20,000 by 2015. Around 1,500-2,000 rooms are expected to be added in this year itself.

Telecom stocks are trading weak led by AGC Networks and Himachal Futuristic. As per a leading financial daily, the ongoing battle between the telecom department and Idea Cellular is set to intensify. The telecom ministry has decided to slap a fine of Rs 3 bn on Idea as per the recommendation of the Additional Solicitor General. This fine is a penalty for holding more than 10% stake in two mobile companies in six regions of the country, a violation of existing norms. Further to this, the telecom regulator has recommended cancelling of the six overlapping licenses held by Idea. It may be noted that Idea had come to hold six overlapping licenses after its acquisition of Spice Communications in October 2008. As per a company spokesperson, post the merger, Idea had written to the telecom department and had offered to surrender the overlapping mobile licenses.

However, in the opinion of legal experts, Idea is in violation of telecom rules as it held more than 10% stake in two telecom companies operating in the same region. Furthermore, Idea and Spice Communications are also in violation of the April 2008 merger guidelines which prohibited new entrants from selling stakes within three years of obtaining licenses.