Indian stock markets recovered

Mon, 30 May 01:30 pm

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The Indian stock market recovered from the lows in the last two hours of trade and is trading flat now. Stocks from the healthcare, consumer durables and realty space are trading firm, while those from the oil & gas and auto space are trading weak.

Both BSE-Sensex and NSE-Nifty are trading flat. However, BSE-Midcap and BSE-Smallcap indices are up 0.8% and 0.6% respectively. The rupee is trading at 45.07 to the US dollar.

Construction stocks are trading mixed with Unity Infraprojects, Unitech, and IVRCL Ltd leading the pack of gainers. However, NCC Ltd and Simplex Infrastructures are trading weak. As per a leading financial daily, DLF plans to sell developed properties. It is expecting to mop up Rs 70 bn in the next two years. The amount will help to reduce its heavy gross debt balance of Rs 239 bn. The properties intended to be sold include five IT parks and its hotel business. The company's tax liabilities have touched Rs 17 bn in FY11 and it has received an additional tax demand of Rs 5.5 bn from income tax department in 4QFY11. This is over and above Rs 12 bn demand made in the previous quarter.

Over last one and a half years, the company has sold some non-core assets like hotel sites in Delhi and Hyderabad and other land parcels to mop up around Rs 30 bn. However, the sales never included buildings and other developed assets. With an intention to become debt free in the medium term and reduce tax liabilities, it has almost doubled its fund raising target from divestment of non-core assets. The original plan included raising Rs 45 bn from non-core assets. But now, the company intends to raise Rs 100 bn in the next two three years. While it has already managed Rs 30 bn from sale of non-core assets, it is now identifying properties to raise the remaining Rs 70 bn. The stock of the company is trading firm.

Most of the telecom stocks are trading in the red with Tata Teleservices (Maharashtra), ITI Ltd and Tata Communications leading the pack of losers. However, Himachal Futuristic and Idea Cellular are trading firm. As per a leading financial daily, the Central Bureau of Investigation (CBI) is probing Idea Cellular and Tatas for violations of licence conditions in Mumbai circle in 2005-2006. At that time, both Tatas as well as the Birla Group owned more than 10% in the company. As per CBI, Idea Cellular application was invalid as the Tatas were already operating CDMA-based mobile services in Mumbai. Any acceptance of the application was not possible as it would have resulted in Tatas having more than 10% stake in two telcos operating in the same area which was not permitted by Indian telecom regulations. Despite that, the application was not rejected but put on hold till Idea Cellular became compliant after the Tatas exited the company in 2006. The spokesperson for Idea cellular has said that the allegation is not based on facts as when Idea applied for the Mumbai license, there was no competition. Hence, there cannot be any case of department of telecom favouring the company. The investigation is at an initial stage and the CBI is yet to file formal charges or even register a first information report.