Oil & Gas leads markets higher

Wed, 15 Sep 11:30 am

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After starting today’s session on a positive note in the morning Indian indices have managed to hold on to their gains. Other key Asian markets are trading mixed with Nikkei up and Hang Seng flat. Currently heavyweights in the Sensex are trading in the green with stocks from the IT and oil & gas space witnessing strong buying activity. However, stocks from the banking and consumer goods space are trading flat.

Currently, the BSE-Sensex is trading up by around 180 points, while the NSE-Nifty is up by about 72 points. Strong buying interest is also being witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 0.57% and 0.56% respectively. The rupee is trading at 46.35 to the US dollar.

Banking stocks are mainly trading positive with Kotak Bank and Axis Bank leading the gains. Bank of Baroda (BoB) will be taking over the assets and liabilities of Memon Co-operative Bank. This bank has been facing moratorium since May 2009. BoB will acquire total business of Rs 5 bn, which includes Rs 2.9 bn of deposits the balance being loans and investments. Its loan book is barely 0.1% of that of BoB’s.

18 branches of Memon Co-operative Bank will also be acquired, out of which 13 premises are owned by the co-operative bank itself. Memon also has around 225-250 employees, however it is not mandatory for BoB to retain the staff. Most importantly, BoB will get access to an additional 150,000 customers to whom it will be able to cross-sell its products. BoB feels that it will be able to recover some of the impaired loans of Memon through its recovery mechanism. The bank may get some relief from Deposit Insurance and Credit Guarantee Corporation, however, for these loans. This was one of the major reasons why Memon fell into trouble.

FMCG stocks are trading strong with P&G Hygiene and Dabur leading the gains. However, HUL and Nirma are trading weak. As per a leading news daily, ITC is planning to grow its education and stationery products business by 150% to Rs 10 bn in less than five years. The stationery business has two brands namely Classmate and Paperkraft. It should be noted that ITC forayed into the stationery products business in 2002 with its premium office segment brand Paperkraft. It also launched popular segment brand Classmate in 2003. In order to grow ITC plans to utilize its mainstream channel network to target new markets and expand coverage. The company also has plans to start selling stationery products in Nepal. It should be noted that the stationery market in India is growing at 10-11% and ITC is the market leader with a 12% market share.