Profit booking drags indices

Fri, 2 Jul 11:30 am

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After starting today's session on a positive note, Indian indices lost all their gains during the last two hours of trade. Stocks from the metal and IT space are trading in the red while stocks from the PSU and consumer durables spaces are witnessing buying interest. Other key Asian markets are mainly trading in the red.

The BSE-Sensex is trading down by around 44 points, while the NSE-Nifty is down by about 16 points. Mid and small cap stocks are however trading positive with the BSE-Midcap and the BSE-Smallcap trading higher by 0.2% and 0.4% respectively.

Auto stocks are trading flat with Maruti leading the gains. Bajaj Auto and M&M are trading marginally in the red. As per a leading news daily, Tata Motors is planning to manufacture around 30,000 Nano's a month by FY11. Accordingly, the company has asked Nano's component suppliers to increase the volume of supplies. Presently, the vendors supply components sufficient for about 10,000 Nano's a month. Thus targeted increase in the production of Nano's would require the vendors to increase their supplies three times from current levels.

At present, Tata Motors produces Nano from its plants at Pantnagar in Uttarakhand and Sanand in Gujarat. The company is aiming at a combined output of 360,000 units from FY12 onwards. Right now, the Sanand plant has a capacity to produce 250,000 units a year while the Pantnagar plant can produce 50,000 units a year.

Fertiliser stocks are mainly trading positive, with Gujarat State Fertilisers Company (GSFC), Gujarat Narmada, and Nagarjuna Fertilisers leading the gains. Tata Chemicals, is planning to set up a urea plant of 1 m tonne per annum (mtpa) capacity. For this purpose it has lined up capex of Rs 40 bn over the next few years. It also plans to set up 10 specialty fertiliser plants. This calls for an investment of Rs 500-600 m per plant in various phases over the next 2-3 years. The first phase is likely to be commissioned in 2QFY11. The second phase is likely to kick off in 2HFY11. 4 plants will be commissioned in FY12.

The capex investment will be funded through a mix of debt and equity. There is a proposed preferential allotment of 11.5 m shares to Tata Sons to partly fund capex plans. This will provide the company with Rs 4 bn. The funds raised would be mostly used for expansion at the Babrala fertiliser plant at Uttar Pradesh. The capacity of this plant would be raised to 1.2 m tonnes annually from its current 864,000 tonne capacity.