Flat with negative bias

Thu, 16 Sep 11:30 am

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After starting today's session on a positive note in the morning Indian indices have lost most of their gains, and are trading in the red currently. Other key Asian markets are trading weak with China down 2%. Currently heavyweights in the Sensex are trading weak with stocks from the FMCG and banking space witnessing some buying activity. However, stocks from the IT and realty space are trading in the negative.

Currently, the BSE-Sensex is trading down by around 19 points, while the NSE-Nifty is down by about 12 points. Mid and small cap stocks are trading mixed as the BSE-Midcap is down by 0.2% while the BSE-Smallcap is trading up by 0.2%. The rupee is trading at 46.35 to the US dollar.

Oil & gas stocks are trading mixed with Cairn India and HPCL leading the gains. Essar Oil and RNRL were however trading weak. Indian Oil Corporation (IOC) plans to use the funds from its public offer for expansion of its petrochemical and LNG business. These were previously put on hold due to a funding crunch. The company aims to raise Rs 100 bn through an issue of 10% fresh equity in the last quarter of FY11. The government will also be offloading 10% stake in IOC. It was earlier forced to put projects on hold including petrochemical plants at Paradip in Orissa and at Koyali refinery in Gujarat. The Orissa project is likely to cost Rs 150 bn. An LNG terminal at Ennore in Tamil Nadu was also put on hold due to stressed finances caused by losses on the sale of petrol, diesel, LPG and kerosene at regulated prices.

The share sale proceeds would help IOC revive its petrochem projects, the 2.5 m tonne LNG terminal, and an associated 1,000 MW power plant in Ennore. The projects at Tamil Nadu are likely to cost Rs 80 bn. IOC has identified petrochemicals as a prime driver of its future growth. It has been investing in projects which will help it tap rising demand for plastics and synthetic rubbers in India.

Auto stocks are trading mixed with Maruti Suzuki and Tata Motors leading the gains. However, Exide and Escorts are trading weak. Maruti expects its sales momentum to slow down in the second half of the fiscal compared to the 26% growth achieved so far in the first half. High base effect and inflationary pressures persisting in the economy are likely to impact growth in the second half. Although the company is anticipating lower growth it is hopeful of maintaining the number of units sold per month in the historical past.

Recently Maruti has also seen its market share fall below 50% for the first time. The company is losing customers to rivals because of production constraints and high waiting period for some of its cars. However, now the company is planning to increase its output by 10% to 0.11 m units every month from October. Maruti also plans to expand its production capacity to 1.75 m units per annum by 2013 from the exiting 1.2 m units.