Profit booking takes centre stage

Tue, 28 Sep Closing

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The benchmark Indian indices managed to edge closer to the dotted line at the end of the session today. In what seemed to be a day of profit booking across sectors, the domestic investors were keen to cash in on the FII frenzy. With reports of the ADB projecting that India will sport a higher GDP growth as compared to its Asian peers in 2011, the FIIs added more Indian stocks to their kitty. Thus bringing their net buys to over US$ 18 bn in 2010. However, profit booking in index heavyweights like HDFC, HUL and Reliance led the indices to tread in a narrow range.

While the BSE Sensex closed lower by around 13 points (down 0.1%), the NSE Nifty lost around 6 points (down 0.1%). The BSE Midcap and BSE Smallcap indices, however, bucked the trend and closed marginally higher. Gains were largely seen in power and engineering stocks, while telecom and banking stocks were at the receiving end. As regards global markets, Asian indices closed weak today while European indices have also opened on a cautious note. The rupee was trading at Rs 45.16 to the dollar at the time of writing.

As per a business daily, debt ridden telecom major Reliance Communications is once again in talks to sell stake in its telecom tower business. It may be recalled that in an unexpected blow, the company's agreement to spin off the mobile towers unit, Reliance Infratel, into a venture with GTL Infrastructure had fell apart earlier this month. That deal, announced in June, would have cut debt by about US$ 3.9 b, or more than half. However, this time the company is considering the possibility of combining such a transaction with a possible IPO.

Construction major HCC, which acquired controlling stake in Swiss developer Karl Steiner AG earlier this year, is looking for buy outs in Europe and Middle East. The company plans to spend around US$ 100 m or more for each of the new acquisitions. The company now wants to boost its presence in toll roads from its current six projects, at a time when the NHAI looks to open bids for around 6,000 kms by March next year.

HCC will bid for at least 3 to 4 national highway projects over the next six months, each worth between US$ 1.5 bn to US$ 2 bn.

However, it may be noted that HCC has one of the highest debt/equity ratios in the industry. As of FY10 this ratio stood at 1.7x. Majority of the debt is taken to fund the working capital requirements. Since HCC has higher share of hydro power projects which typically have a long gestation period, the working capital requirements of the company are above industry average. The stock closed marginally lower today.