Reliance truce boosts markets

Mon, 24 May 09:30 am

   Previous Close   

   Pre-Open   

   11:30 am   

   01:30 pm   

   Closing   

The Indian markets have started today's session on a positive note, largely led by Reliance group of stocks. The benchmark indices opened above the breakeven mark and have managed to hold on to their gains since then. Other key Asian markets are in the green with China (up 3%) leading the pack of gainers. The US markets closed higher by 1.3% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with the Reliance pack, auto, and construction majors finding buying interest. The BSE-Sensex is trading higher by around 200 points, while the NSE-Nifty is up by about 60 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 1.9% and 2.1% respectively. The rupee is trading at 46.93 to the US dollar.

Steel stocks have opened the day on a positive note. Gainers here include Jindal Saw and JSW Steel. As per a leading business daily, steel giant SAIL plans to expand operations worldwide after being conferred the 'Maharatna' status by the government recently. This status will allow the company to make equity investments up to Rs 50 bn to set up financial joint ventures and wholly-owned subsidiaries in India or abroad without government's approval. However, the company needs to first appoint five independent directors to qualify for the status. It may be noted that the government has recently also awarded this status to NTPC, Indian Oil, and ONGC. It may be noted that SAIL is currently undertaking Rs 700 bn expansion project to enhance its annual production capacity to 23 m tonnes, from the current 14 m tonnes. It is also in talks with Posco to jointly set up steel plants at a cost of Rs 150 bn in India. As such, in our view, the financial powers under the 'Maharatna' status will help execute its plans.

FMCG stocks have opened the day on a positive note. Gainers here include Godrej Consumer and Henkel India. ITC declared its FY10 results late last week. Overall sales grew by 17% during the year backed by higher sales in the FMCG business as well as the paper and paperboard business. ITC's cigarette portfolio grew 20% YoY during 4QFY10. This growth in sales was supported by introduction of new brands, price hikes and strengthening of trade and distribution channels. The branded packaged foods business grew on the back of improved product mix, smarter sourcing of inputs, improved servicing of markets and supply chain efficiencies. The hotels business showed a decline of 9% in sales during the year. Net profit of the company for FY10 increased by 24% YoY, while net profit margins expanded by 1.5%. This growth comes on the back of higher operating income registered during the year, partly offset by higher interest costs and higher tax expense.