Cautious undertone

Wed, 28 Sep Closing

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Taking cues from cautious sentiments across global markets the benchmark indices in Indian stock market languished in the red for most of the session today. After a cautious opening, selling pressure across heavyweights forced the indices to stay below the dotted line. While the BSE-Sensex closed lower by around 78 points (down 0.5%), the NSE-Nifty closed lower by around 25 points (down 0.5%). The BSE Mid Cap and the BSE Small Cap also failed to do better as they lost 1% each. Gains were restricted to FMCG, pharma and IT stocks.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a cautious note. The rupee was trading at Rs 48.73 to the dollar at the time of writing.

Given the poor execution rate of power generation projects in India, the government has hinted that it may review the planned targets of power generation. For the current five year plan (2007-12) the government has targeted to generate power around 1 lakh megawatt. However, by the end of 2011, India has not been able to cross even 60,000 megawatt. For the 11th 5 year plan, the Planning commission estimated the size of the domestic market in generation equipment to increase from US$ 5.7 bn to US$ 25-30 bn by 2012. Further, the size of the transmission and distribution equipment industry was expected to increase from US$ 18.5 bn to US$ 70-75 bn in coming ten years. However, most of the targets have remained on paper or have been toned down. The prospects of the players in the sector remain hinged to better availability of fuel (especially coal) and policy transparency.

Mahindra Insurance Brokers (MIBL), 100% subsidiary of Mahindra & Mahindra Financial Services (Mahindra Finance) has received approval from the Insurance Regulatory and Development Authority (IRDA) to enter the reinsurance broking business. MIBL has however, been in the direct broking business since May 2004 and has now been granted the composite broking license, allowing it to also undertake reinsurance broking. Mahindra Finance itself saw a 47% YoY growth in advances during 1QFY12. Due to the good monsoon, the company expects to clock in a good growth in advances for the full year as well. The company usually sees better growth in the later part of the year due to the festival season. The rural market runs mainly on sentiments, thus if the monsoon is good, and crop yields increase, there is more demand for vehicles.