Auto stocks leading gains

Tue, 14 Sep 11:30 am

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After starting today's session on a positive note, Indian indices have managed to stay well in the green during the last two hours of trade. Other key Asian markets are trading mixed with Japan down 0.4%. Currently, heavyweights in the Sensex are in the green with stocks from the auto and IT space witnessing strong buying activity. However, stocks from the realty and power space are trading negative.

Currently, the BSE-Sensex is trading up by around 102 points, while the NSE-Nifty is up by about 23 points. Mid and small cap stocks are trading weak as investors prefer large caps. The BSE-Midcap and BSE-Smallcap indices are trading down by 0.6% and 0.7% respectively. The rupee is trading at 46.36 to the US dollar.

Capital goods stocks are trading mixed with Suzlon and Punj Lloyd leading the gains. Lakshmi Machine Tools and Bharat Bijlee are on the receiving end. L&T plans to open a container terminal by January 2012 at Kattupalli in Tamil Nadu, where it is also building a shipyard. L&T will construct the berth and install necessary equipment at the container terminal. It has decided to adopt the operation and maintenance (O&M) model for selecting a firm to run the terminal. The O&M contractor will run the facility for a fee. This O&M model will allow L&T to retain 100% equity in the project, and yet have a world-class operator to run the terminal. It plans to select the O&M contractor in the next few months. The container terminal will be able to handle 1 m standard containers initially, and its capacity can be scaled up to 1.5 m containers as demand grows. By setting up the facility at Kattupalli, L&T is eyeing potential traffic of 2.5-3 m standard containers a year from near Chennai as well as from the proposed Ennore SEZ adjacent to the site.

Auto stocks are trading mixed with Maruti Suzuki and Tata Motors leading the gains. Apollo Tyres and Amtek Auto were however trading weak. According to a leading business daily, Maruti Suzuki is doing all it can in order to fight rampant competition in the small car segment. Despite record sales month after month in 2010 and long waiting periods on most of its models, it has increased discounts this festival season compared with last year.

It has negligible inventories of about a week to 10 days. Its competitors Tata Motors, Hyundai Motor India and General Motors have stocked up. It has increased discounts to keep competitors away and entice customers despite not being able to service the current demand. The models Alto F8 and K-10 are facing stiff competition from Hyundai Santro, Tata Indica and the Tata Nano. There are virtually no waiting periods for these cars. Plus equivalent discounts are being offered on some of them. The new WagonR is also facing stiff competition from Hyundai i10. Discounts offered on various cars range from Rs 5,000 for the Swift to Rs 60,000 for the SX4.