Auto & banking stocks find favour

Fri, 9 Apr 11:30 am

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The Indian markets continued to trade in the positive territory during the previous two hours of trade. Buying activity is being witnessed in stocks across sectors with gains seen in the heavyweights from various sectors. While stocks from the auto, banking, power and software sectors are leading the pack of gainers, select stocks from the power and telecom sectors are losing ground.

The BSE-Sensex is trading higher by 200 points while the NSE-Nifty is trading higher by 55 points. The BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% and 1.5% respectively. The rupee is trading at 44.39 to the US dollar.

With a rebound being witnessed in discretionary spending, corporates are unveiling expansion plans. Buoyancy in the economy has led the hospitality major East India Hotels (EIH) to line up aggressive expansion plans. Both the company's brands, Trident and Oberoi, will see ramp up in room capacities. Before that it plans to reopen its Mumbai property on April 24 of this month, which was under renovation post the terrorist attacks. Then eventually, the company plans to roll out one property in the domestic market and 5 properties in the Middle East in the next 3-4 years.

In all, EIH operates 2,200 rooms under the Oberoi brand and will see addition of 700 rooms under the same brand by 2013. The company plans to roll out two new properties under the brand Trident, one in Hyderabad and other in Dehradun by 2012. The company expects the Oberoi brand to witness 35% to 40% growth, while Trident will grow at a lower rate of 15% to 20%. Adding rooms across geographies is expected to help the company boost revenues. However, competition is also intensifying. The addition of more rooms is likely to exert pressure on room rates going forward. The stock of EIH is trading higher currently.

Media companies like Jagran Prakashan, Mid-day Multimedia, HT Media and Deccan Chronicle are trading in the green today. According to a leading business daily, media firm, Jagran Prakashan which publishes Dainik Jagran, the largest read Hindi daily in India, is seeking strategic alliance with Mid-day Multimedia. Though the discussion is in preliminary stage, it is believed to pan out in the form of a possible stake buy or a marketing tie-up.

It may also be noted that very recently a US based private equity firm, Blackstone Group had announced that it will be investing US$ 50 m (or Rs 2.2 bn) in Jagran Media Network Pvt. Ltd which is the parent company for Jagran Prakashan. The company has hinted that these funds would be used for capital expenditure and for a potential acquisition. We believe that Jagran Prakashan's move to strike an alliance with smaller peers like Mid-day is a prudent way to strengthen its foothold in India, the world's second largest print media market. Mid-day, which is currently a loss making entity, might see a turnaround if Jagran Prakashan manages to improve the product and leverage its brand and marketing channel for the same.