Metals & realty add to selling pressure

Wed, 25 Aug 11:30 am

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After starting today's session on a negative note, Indian indices have lost further ground and are trading deep in the red currently. Other key Asian markets are trading in the negative territory as well with Nikkei (down 2%) leading the pack of losers. Currently heavyweights in the Sensex are trading weak with stocks from realty and metals space witnessing selling activity. However, stocks from IT and FMCG space are trading flat.

Currently, the BSE-Sensex is trading down by around 100 points, while the NSE-Nifty is down by about 34 points. Buying interest amongst the mid and small cap stocks is also weak as the BSE-Midcap and BSE-Smallcap indices are trading lower by 1.4% and 1.6% respectively. The rupee is trading at 46.93 to the US dollar.

Pharma stocks are trading weak with Glenmark Pharma and Wockhardt leading the pack of losers. However, Natco Pharma and Sun Pharma are trading flat. In a bid to push the realty business, Piramal Healthcare plans to develop residential apartments or business hub over 40 acres of prime land in Thane. Right now, the company has a manufacturing plant over that land which produces vitamin A. Management is not keen on continuation of the plant and has offered VRS to its employees causing an agitation against the closure plan. However, the company needs the civic body's approval for change of use of land from industrial to residential. Piramal Healtcare's move into realty business comes at a time when majority of the textile companies having legacy land banks in Mumbai have decided to engage in real estate development, signaling a revival in the real estate sector. It should be noted that over time, Thane has emerged as an attractive destination for property buyers due to its strategic location and also because of proposed infrastructure development.

Telecom stocks are trading negative with Bharti Airtel and Tata Teleservices leading the pack of losers. Reliance Communications (RCom) is also trading weak. GTL Infra and RCom's tower subsidiary plans to convert around Rs 60 bn of loans from their promoters into equity and issue fresh shares worth US$ 1 bn (Rs 47 bn) to investors. This transaction will see the two companies bringing down the debt of their merged telecom tower holding entity. To achieve these reduced debt levels, GTL Infra having around Rs 20 bn of promoter debt, will convert this to equity prior to the merger. RCom's promoters will also convert loans worth Rs 37-39 bn to equity in their tower subsidiary. The entities will then be merged to form a company that will retain the name GTL Infra, with around 84,000 telecom towers, with an average of 1.5 slots rented out to telecom operators on each tower. The net debt of the merged company will be close to Rs 170 bn.