Markets down on profit booking

Thu, 23 Sep 11:30 am

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After opening on a weak note, Indian indices have remained in the red on profit booking. Other key Asian markets are trading mixed with Nikkei down 0.4%. Currently heavyweights in the Sensex are in the red with stocks from the healthcare and PSU space trading in the positive. However, stocks from the realty and FMCG space are facing selling pressure.

Currently, the BSE-Sensex is trading down by around 62 points, while the NSE-Nifty is down by about 25 points. Buying interest is also muted amongst the mid and small cap stocks as the BSE-Midcap index is trading flat while the BSE-Smallcap index is up 0.4%. The rupee is trading at 45.67 to the US dollar.

Auto stocks are trading mixed with TVS Motor and Ashok Leyland leading the gains. However, Escorts and Maruti Suzuki are trading weak. According to a leading business daily Mahindra & Mahindra (M&M) may join a consortium of equity financiers to bid for Fiat’s car factory in Sicily. The Indian auto major had been evaluating the Fiat plant for almost a year now. It is considering joining a consortium, led by private equity (PE) firm Cape Natixis, to take over the electric vehicle manufacturing unit. This move may leverage the Mahindra Group’s Reva Electric Car Company to make electric automobiles at the Fiat plant. M&M had picked up a 55% stake in Reva earlier this year. Cape Natixis, has a preliminary agreement with Reva to build electric vehicles at the plant. The PE firm’s CEO plans to invest as much as Euro 450 m (US$ 602 m) towards this. The PE fund may contribute up to Euro 100m towards this project.

Fiat will stop production at the factory, employing around 1,400 workers, by the end of 2011 and has been looking around for buyers. Earlier, there were reports that the Tata Group was interested in the plant. M&M stated that talks were still at a preliminary stage.

Real Estate stocks are trading weak with Unitech and HDIL leading the pack of losers. However, Atlanta and Ansal Housing are trading strong. As per leading news daily, realty major DLF has been directed by the competition watchdog Competition Commission of India (CCI) not to cancel allotments for its upcoming residential project in Gurgaon. However, investigations against the company for abusing its dominant position will continue. It should be noted that the CCI ordered a probe against the realty major DLF when it found that the real estate developer had abused its dominant market position and the agreements with the buyers were one sided in nature. These complaints refer to certain projects, namely Belaire and Park Plaza. Belaire is a residential project in Gurgaon scheduled to be completed in 2009 but the buyers are yet to receive possession, while for Park Plaza DLF has been accused of adding 10 more storeys without informing the buyers. CCI ordered a probe against DLF after receiving complaints from some individuals.