Capital goods stocks aid in cutting losses

Wed, 13 Jun 01:30 pm

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Persistent buying activity during the post noon trading session led the Indian equity markets to cut their losses and enter the positive territory. Stocks from the capital goods space are leading the pack of gainers followed by those forming part of the FMCG, healthcare and IT spaces. Auto stocks are amongst the top underperformers at the moment.

The Sensex today is trading higher by about 60 points (up 0.4%), while the NSE-Nifty is trading higher by about 20 points (up 0.4%). The BSE Mid cap and BSE Small cap indices are trading higher by about 0.2% and 0.5% respectively. The rupee is trading at 55.69 to the US dollar.

Auto stocks are currently trading weak with Maruti Suzuki and Mahindra & Mahindra leading the pack of losers. A leading business daily has reported that truck manufacturer Ashok Leyland (ALL) is looking at expanding its export presence or starting local operations in five country clusters. These include West Asia, Africa, CIS, Asean and Latin America. As of now, the company's export presence has been mainly towards Sri Lanka and Bangladesh, which the management now considers as good as domestic markets. This strategy to expand reach is to curb the domestic market cyclicality. As per the management, the idea is to enter these regions by partnering with local players that have both market access and knowledge. ALL would provide the chassis or chassis kits, on which the local player would build the body. Having said that, the company's management has mentioned that ALL is also open to acquisitions and not looking at only tie-ups per se. As per the management, the acquisition must bring in market access and technology, and not only size.

Telecom stocks are currently trading firm led by Reliance Communications and mahanagar Telephone Nigam Limited (MTNL). As per a leading financial daily, banking regulator Reserve Bank of India (RBI) has accepted the proposal to enable telecom companies to mortgage spectrum or airwaves in order to raise funds for participation in auctions. In the event of default or cancellation of mobile permit, the lending banks have the rights to sell, transfer, assign, exchange and dispose off the airwaves of the borrowing telecom company. RBI's stand has been approved by the Finance Ministry and the latter has asked the Department of Telecommunications (DOT) to incorporate speedy policy changes to provide for utilization of spectrum as collateral. The implementation of this proposal is likely to boost the confidence of banks that had stopped lending to telecom companies in the aftermath of the 2G spectrum scam and cancellation of 122 mobile permits. This development comes at a time when the telecom companies are having difficulty in raising funds to pay the minimum price prescribed by the sector regulator TRAI in order to participate in the 2G spectrum auction. Reportedly, the total debt of the telecom industry has swelled to Rs 2,750 bn.