Indian share markets remain in red

Mon, 29 Jul 11:30 am

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Indian share markets have remained in red during the previous two hours of trade. The most noticeable upward movements have been witnessed in IT and auto shares; whereas FMCG and Public Sector Units shares (PSU) are facing the maximum selling pressures.

The BSE-Sensex is down by 96 points and NSE-Nifty is down by 33 points. BSE Mid Cap is down by 0.9% and BSE Small Cap is down by 0.7%. The rupee is trading at 59.22 to the US dollar.

Automobile stocks are trading on a mixed note with Force Motors and Mah. Scooters leading the gains, while Eicher Motor and Maruti Suzuki are leading the losses. According to a leading financial news medium, Maruti Suzuki India Ltd, the country's largest car maker, has decided to foray into the light commercial vehicle (LCV) segment over the next two years. The LCV will be developed on the platform of the parent Suzuki Motor Corporation's (SMC) Carry, a vehicle sold in China, Indonesia and Pakistan. The Management had already planned in the original agreement with SMC in 1982 for the launch of the Carry LCV but due to poor market response, the plan was shelved. Due to the poor bookings way back in 1983, the company had decided to drop the plan for launching the LCV. But today the situation has changed and the Board has given an in-principle approval to go ahead with the project. The name of the proposed product is not yet decided, but it is expected to be made available in both diesel and CNG (compressed natural gas) variants. The LCV will adapt the diesel engine licensed from Fiat and will be a pure goods carrier. The diesel engine would be produced locally.

The passenger car market has been witnessing a slowdown. Hence, the plan to enter the LCV segment would enable diversification in the product portfolio and aid in de-risking the business. The growth prospects for Maruti Suzuki remain well poised from a long-term perspective. Good monsoons and the pick-up in festive season is expected to drive the volumes despite the headwinds.

Power stocks are trading on a mixed note with JSW Energy and Jaipraksah Power leading the gains, while Torrent Power Ltd and GVK Power and Infra are leading the losses. According to a leading financial news daily, Tata Power, has sought certain waivers from lenders to ensure further disbursements of loans to the 4000 MW Mundra plant. This plant stands as the country's first operational ultra mega power project. The amounts for which the waivers have been sought are related to certain terms in the loan agreement.

Mundra project is being run by Coastal Gujarat Power Ltd (CGPL) which is a wholly-owned subsidiary of Tata Power. The original cost estimate for Mundra project was Rs 170 bn. IFC, IIFCL, ADB, Korea Eximbank, BNP, SBI and nine other lenders have been doing funding for the project. The debt to equity ratio for the plant's financing is 75:25. The Mundra project has been grappling with significant financial burden including impairment provisioning against its assets. Higher imported coal prices and lower tariff realisation has been the primary reasons for the same.

The largest private power producer, notwithstanding the above challenges, is poised to grow and look at new opportunities. But it will strategically plan its investments in a manner where there is no immediate large cash outgo and there is no large commitment. Tata Power's share is down by 0.3%.