Metal, realty keeps markets in red

Tue, 18 May 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

The benchmark indices pared most of their opening losses and traded marginally below the dotted line during the previous two hours of trade. Stocks from consumer durable and capital goods space are seeing buying interest while stocks from realty and metal sectors are witnessing a sell off.

BSE-Sensex is trading marginally in the red while NSE-Nifty is trading 7 points below the dotted line. BSE-Midcap index is trading higher by 0.5% while the BSE-Smallcap index is trading 1.2% above yesterday's closing. The rupee is trading at 45.6 to the US dollar.

Engineering stocks are trading strong with heavyweights like L&T and Cummins leading the gainers. As per a press release, Swiss engineering company ABB has announced an open offer for the shares of its Indian subsidiary ABB Ltd. The open offer is for 48.5 m equity shares at an offer price of Rs 900. This represents 22.89% of voting rights in ABB Ltd. This deal is worth US$ 965 m and will raise the stake of the parent company from 52% to 75%. Even after this buy back, the parent company will have US$ 5 bn in cash, leading to speculation that the parent company plans to take its stake even higher and eventually plans to delist the Indian subsidiary. The open offer will commence on 8th July and end on 27th July 2010. While the offer price is expensive at three times sales of ABB Ltd, the premium is a reflection of the growth potential of the company.

Telecom stocks are trading higher led by Bharti Airtel and Idea Cellular. A leading business daily has reported that the Department of Telecommunications (DoT) might reject the recent proposals that were made by the Telecom Regulatory Authority of India (TRAI) last week. One of the key proposals was that of the telecom operators paying a one-time fee on excess spectrum on the basis of the 3G spectrum prices. This proposal in itself saw a lot of controversy considering that the efficiency of 2G spectrum is way below that of 3G spectrum. As per the DoT, the efficiency of 3G spectrum is three times more than that of the 2G spectrum. As such, the price of 2G Spectrum has to be accordingly discounted over 3G.

However, it is further reported the DoT plans to work on a new formula based on the efficiency of the spectrum. While there is no official statement from the department, keeping in mind the overall efficiency of the spectrum, the rates would be in the range of about one-third of what was originally proposed. This would be a relief on the incumbent telecom operators as the overall one-time fee would be much lower than what was anticipated earlier.