Realty stocks push markets lower

Tue, 31 Aug 09:30 am

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The Indian markets have started today's session on a negative note. The benchmark indices opened below the breakeven mark and have fallen further into the negative territory. Other key Asian markets are in the red with Japan (down 2.6%) leading the pack of losers. The US markets closed lower by 1.4% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading weak with realty and energy majors facing the brunt of selling activity. The BSE-Sensex is trading lower by around 73 points, while the NSE-Nifty is down by about 20 points. Selling interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.3% and 0.2% respectively. The rupee is trading at 46.97 to the US dollar.

Hotel stocks have opened the day on a positive note. Gainers here include EIH and Oriental Hotels. As per a leading business daily, Reliance Industries (RIL) has picked up 14.2 % stake in East India Hotels (EIH). The investment was made through wholly-owned subsidiary Reliance Investments & Holding Pvt. Ltd. The stake was bought from the promoter of EIH, Mr. P R S Oberoi and two other promoter entities, Oberoi Hotels Pvt. Ltd. and Aravali Polymers LLP. As a result, the promoter’s stake in EIH is down to 32.41%. RIL has clarified that this is purely a financial investment and will not impact the day-to-day running of the hotels. Interestingly, ITC also holds a strategic 14.9 % in EIH. This has reportedly been a cause of discomfort for the EIH management. Although, ITC has clarified that it does not plan to launch a hostile bid on EIH, RIL’s role will now be that of the white knight in ward off such attempts. This also further consolidates the RIL group's play in the India consumption story. It had recently acquired a stake in Captain Gopinath's Deccan 360 cargo venture and reentered telecom by buying out Infotel Broadband.

Software stocks have opened the day on a weak note. Losers here include TCS and NIIT. As per a leading business daily, Infosys is planning an ‘extreme offshoring’ model to help reduce its dependence on H1 and L1 visas. In FY10, the company’s offshore revenues were about 53% of the total pie. The company believes it is capable of increasing its offshore utilisation capabilities to 95%. This move comes against the backdrop of a clampdown on visas by the US and growing resentment towards foreign workers and immigrants. The company wants to be prepared to face an extreme situation should the negative sentiment intensify further. If implemented, this model will have a huge impact as it will lead to increased hiring at offshore locations like India and fewer jobs being created onsite.