IT stocks out of favour

Wed, 7 May 01:30 pm

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Persistent selling in index heavyweights has led to the Indian share markets slipping further in the post-noon trading session. Most of the sectoral indices are trading in the green with consumer durables, power and pharma being the major gainers. Only IT, auto and realty stocks are trading in the red.

BSE-Sensex is down 116 points and NSE-Nifty is trading 36 points down. BSE Mid Cap is trading 0.4% up and BSE Small Cap index is trading up by 0.3%. The rupee is trading at 59.9 to the US dollar.

Most of the paint stocks are trading in the red with Berger Paints and Akzo Noble being among major losers. Only Jenson & Nicholson and Kansai Nerolac are trading in the green. As per a leading financial daily, Asian Paints shut its oldest plant in Bhandup, Mumbai with effect from 5th May 2014. The plant, with an installed capacity of 30,000 kl per annum, had started operations in 1958 and manufactured decorative paints. The company had earlier acquired controlling stake of its rival Berger Paints and currently has an installed capacity of nine lakh kl per annum. Asian Paints has six other plants located in Gujarat, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana and Maharashtra. The company manufactures industrial paints in Gujarat and Maharashtra and also has two plants in Tamil Nadu and Gujarat to manufacture industrial chemicals. Asian Paints stock is trading down 0.4% currently.

Auto stocks are trading mixed today. Ashok Leyland and Eicher Motors are leading the stock of gainers, while Maruti is trading weak. As per the proposed Mandatory Vehicle Recall Policy, government is considering penalties on auto manufacturers based on vehicles recalled. Penalty will be proportional to the number of vehicles recalled. So, larger the number of vehicles recalled, larger the amount of penalty. Currently, there is no specific recall policy and automobile manufacturers recall vehicles based on the manufacturing defects. The move comes as the incidence of recalls is rising in the industry and government plans to formulate a policy that would act as a deterrent against erring manufacturers. Besides, the number of vehicles recalled, safety is another important aspect that would determine the penalty imposed. However, industry has criticised the policy citing that vehicle recalls are global practices so as to correct any faulty parts. And the penalty could be proposed for companies that deliberately hide such manufacturing defects and concede the defect when found by authorities. However, distinction between the two is difficult.