Healthcare and auto pull markets into the positive

Mon, 5 Jul 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

Indian indices have managed to climb into the positive territory, after a volatile trading session in the previous two hours of trade. Stocks in the healthcare and auto space are trading firm, while those from the oil & gas and realty space are trading weak. Other key Asian markets are mainly trading in the red.

The BSE-Sensex is up by around 26 points, while the NSE-Nifty is trading around 9 points above the dotted line. BSE-Midcap index is up by 0.6% while the BSE-Smallcap index is trading 0.5% above Friday's closing. The Rupee is trading at 46.71 to the US dollar. Auto stocks are trading mixed with Ashok Leyland and M&M leading the gains. Amtek Auto and Escorts are leading the declines. Bajaj Auto, India's second largest two-wheeler maker after Hero Honda, continued with the buoyant trend in the auto space. The company recorded its highest ever monthly sales of two-wheelers in June. It sold over 282,808 units in the domestic as well as export markets. It zoomed ahead with a 68% growth over June last year. Units sold previously were 167,945 units. Sales of three-wheelers, including exports, grew by 32% to 32,614 units for June 2010, versus 24,731 units sold in June last year. Total sales of both two-wheelers and three-wheelers (including exports) grew by 63% YoY.

However on the negative side the company is also facing production problems along with other auto manufacturers in the industry. Sales for June would have been even higher if not for production constraints which limited sales. The company lost around 20,000 units of production in June due to this constraint. Cost pressures due to increasing raw material prices also forced the company to raise prices of its Discover and Pulsar range by Rs 500-1,000 in mid June.

Banking stocks are trading flat. Major gainers include Canara Bank and IndusInd Bank while IDBI Bank and Union Bank are trading in the negative territory. As per a leading news daily, IDBI Bank plans to raise Rs 35 bn in July to boost its capital adequacy ratio (CAR). The company is planning to offer a 10-15 year plain vanilla bond with a coupon in the range of 8.25-8.75%. The funds raised via the offering will add to the Tier-II capital of the bank. As per RBI guidelines, banks have to maintain a CAR of 9%. Further, Tier-I capital should not be less than 50% of total capital. As of 31 March 2010, IDBI bank's CAR was 11.3% with Tier-I capital of 6.2%.

The finance ministry had recently approved infusion of Rs 62.1 bn in five public sector banks, including IDBI bank. The bank will receive Rs 31.1 bn from the government which will increase the government's stake from 53% to 65%.The capital infusion is expected to take place in September by way of preferential allotment of equity.