Markets begin on a positive note

Fri, 9 Apr 09:30 am

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The Indian markets have started today's session on a positive note. The benchmark indices opened at the breakeven mark and but soon surged into the positive. They have held on to their gains since then. Other key Asian markets are trading in the green with Hong Kong (up 1%) leading the pack of gainers. The US markets closed higher by 0.3% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with auto and construction stocks attracting investors' interest. The BSE-Sensex is trading higher by around 140 points, while the NSE-Nifty is up by about 40 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 0.8% and 1.1% respectively. The rupee is trading at 44.38 to the US dollar.

Steel stocks have opened the day on a positive note. Gainers here include Adhunik Metaliks and Ispat Industries. As per a leading business daily, the government has approved disinvestment in SAIL to mop up around Rs 160 bn. The company will raise an additional 10% equity. In addition, the government will off load a 10 % to the public. This will be done in two rounds. Each round will consist of a 5% follow-on public offer and a 5% sale of the government stake. As a result, the government's shareholding in SAIL will come down to 69%, from 85.6% currently. Public shareholding will rise to 31%, from 14.2%. In our view, the additional equity will help SAIL fund its capital expenditure plan. It will spend close to Rs 700 bn to raise its installed production capacity from 13.8 m tonnes per annum (mtpa) to 23.5 mtpa. The divestment of government stake is in line with its plan to raise Rs 400 bn in FY11. Disinvestment in other public-sector undertakings like Coal India, MMTC and Engineers India is also on the cards.

Auto stocks have opened the day on a positive note. Gainers here include Tata Motors and Hero Honda. As per a leading business daily, Maruti Suzuki is facing growing demand for its cars, but is falling short of production capacity. In the last financial year, the company sold 1 m units. It expects a 10% growth this fiscal. However, the capacity utilisation at the current plant is already over 100%. Unfortunately, new capacity is likely to come on stream only by FY12. The company's engineers are trying to get around the situation by putting in manual lines. It may be noted that Maruti's two plants in Gurgaon and Manesar together have an installed capacity of 800,000 cars but produced over 1 m units in FY10.