Flat with positive bias

Tue, 5 Oct 11:30 am

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After starting today's session on a positive note, the Indian indices have managed to hold on to the gains. However, other key Asian markets are trading mixed. Currently heavyweights in the Sensex are trading mixed with stocks from health care and consumer durables space finding investors favour.

Currently, the BSE-Sensex is trading up by around 56 points, while the NSE-Nifty is up by about 23 points. Strong buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 0.8% and 1.2% respectively. The rupee is trading at 44.76 to the US dollar.

IT stocks are mainly trading positive with Patni Computers and NIIT Tech leading the gains. British Telecom (BT), one of the promoters of Tech Mahindra, has now re-initiated discussions to sell its stake in the firm. BT has been considering an exit from Tech Mahindra for a few years now. It had appointed Credit Suisse as advisor to sell its stake in Tech Mahindra in 2008, but postponed its plans following the financial crisis and stock market collapse.

BT had 30.45% stake in Tech Mahindra as of 30th June 2010. This stake has attracted interest of some private equity (PE) investors. A potential deal for BT's stake in Tech Mahindra will also involve its stake in Satyam Computer Services, (Mahindra Satyam). BT was earlier waiting for a clearer picture to emerge on Satyam's restated financials before proceeding with the sale process. Mahindra Satyam and Tech Mahindra are set to merge at a later date, with formal merger plans to be announced next month. According to a leading business daily, BT is said to be expecting a 30% premium over the current market price for its stake. Thus the potential value of the deal is over Rs 37 bn. The Mahindra Group (owning an over 43% stake in the company) has the first right of refusal for BT's stake in Tech Mahindra. The group is unlikely to exercise it because it would involve a significant financial outflow

Construction stocks are trading firm led by Nagarjuna Constructions and IL&FS Transportation. IVRCL Infrastructure has bagged orders worth Rs 11.2 bn from sectors including water and transportation. The company's water division bagged orders worth Rs 4.5 bn, followed by orders worth Rs 4.4 bn from buildings division. In addition, transportation and power divisions' bagged orders worth Rs 1.3 bn and Rs 0.9 bn, respectively. It may be noted that IVRCL has a healthy order book to the tune of Rs 232 bn as of 30 June 2010. Management expects revenues to remain in the range of Rs 67.5-71.5 bn for the year and has also passed an enabling resolution to raise money in IVRCL Assets & Holdings and Hindustan Dorr-Oliver in the near future.