Sensex gets the tech tonic

Wed, 4 Aug Closing

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A strong bout of buying interest in IT and engineering heavyweights helped the benchmark indices move firmly into the positive territory during the final hours of trade. The BSE Sensex gained in the region of around 102 points (up 0.6%) today whereas NSE Nifty was up around 28 points (up 0.5%). While the BSE Midcap index lagged behind with marginal gains, the small cap index closed with 0.5% gains today. IT and engineering heavyweights like TCS, Infosys and BHEL were amongst the top gainers.

While the Asian indices closed a mixed bag today, India led the pack of gainers. Europe is trading weak currently. The rupee was placed at 46.18 to the dollar at the time of writing.

One of India's largest textile manufacturer and retailer Raymond plans to add about 100 retail outlets this fiscal as domestic consumer sentiment turns buoyant. While the company has been witnessing weak demand for exports, domestic demand continues to remain firm. Raymond plans to open upto three-fourths of the new stores in non-metros and class IV and V towns. This will mean adding 175,000 square feet of retail space to its existing retail space of around 1.4 m square feet. It also plans to expand its shirtings capacity by 10 m metres per annum under its joint venture with Italy's Gruppo Zambaiti.

Although the company has been trying to safeguard its margins by focusing on domestic growth, the same has not yielded results so far. It is currently in the process of setting up a gas-based captive power plant at Vapi in Gujarat to reduce costs and increase profitability. However rising raw material costs, particularly cotton, remains a concern and the company would look to pass on some of the price increases.

As per a business daily, the country's nodal power regulatory agency CERC is keeping an eye on movement of electricity prices. Although most power companies and exchanges are opposed to the regulator's proposal to cap electricity prices, the latter is keen to do so. The utility companies believe that the move may affect competitive rates being discovered in tariff-based bidding. However, the CERC has observed that there were instances wherein power sellers made abnormal profits without undertaking much risk. CERC admitted prices were declining, though they were still on the higher side. Internationally, prices were in the range of Rs 2.50-3.50 per unit, while currently prices on exchanges were at Rs 3.50 to Rs 4.85 per unit. Any regulatory measure in this regard may further cap the profitability of power utilities like NTPC, Tata Power and trading companies like PTC.

At a time when India's fiscal woes were seen being addressed, the government has reportedly sought approval to spend Rs 546 bn (US$ 11.8 bn) on social spending. The money raised through bumper sale of telecom bandwidth was expected to be used to cut the gaping fiscal deficit. However, that does not seem to be the case. However, the Finance Ministry believes that the extra spending will not widen the projected fiscal deficit because of higher-than-anticipated non-tax revenue. In fact one-fifth of the budgeted spending would come from government savings.

Of the additional spending, the government plans to spend Rs 73 bn for rural development and Rs 33 bn on the farm sector. Further Rs 140 bn will be given to oil companies to compensate them for selling auto and cooking fuels at regulated prices in the last fiscal.