Indian markets recoup

Wed, 7 Oct 11:30 am

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After opening on a flat note, the Indian Markets have added to their early gains and are currently trading well above the dotted line. Sectoral indices are trading on a mixed note with stocks from the auto and metal sectors leading the gains.

The BSE-Sensex is trading up 84 points (up 0.3%) and the NSE-Nifty is trading up 18 points (up 0.2%). The S&P BSE Midcap index is trading up 0.1% while the S&P BSE Smallcap index is trading up 0.7%. The rupee is trading at 65.18 to the US dollar.

Stocks in the aluminum space are trading on a positive note with Hindalco and Nalco leading the gains. According to an article in Economic Times, domestic aluminum producers are urging the government to impose a safeguard duty on aluminum imports in a scenario of falling international prices and increasing product costs. Aluminum Association India (AAI) representatives are of the same view and are trying to push the matter forward. The cost of production for AAI members has risen 29% since April 2011. With imports accounting for 55% of aluminum consumption in the country at present levels, AAI has suggested that aluminum deserves to be treated as a core industry. Hindalco, Vedanta and Nalco are among the producers demanding this safeguard duty, as was imposed in case of some steel products. One must note that the government had recently imposed a 20% provisional safeguard duty on hot-rolled flat steel products for 200 days. We are of the view that long term investors should not panic over such near term concerns. The idea is to buy potential fundamentally strong aluminum companies with solid balance sheets from a long term perspective. While doing so, one must also ensure that to buy these stocks at reasonable valuations, keeping in mind the possible downside due to near term macro concerns.

Private sector banking stocks are trading mixed with South Indian Bank and Lakshmi Vilas Bank leading the gains. As per a leading financial daily, National Commodity & Derivatives Exchange Ltd (NCDEX) has announced its tie-up with Kotak Mahindra Bank to promote financial inclusion through electronic pledge facility. The tie-up aims to provide financing to the depositors of goods in warehouses which will be approved by the exchange. As per the agreement, farmers and traders can use their commodities stored in approved warehouses as collateral for availing financial assistance from Kotak Mahindra Bank. In addition to Kotak Mahindra Bank, HDFC Bank, Axis Bank and IndusInd Bank are also associated with the exchange to provide this facility. Apart from these banks, 10 non-banking financial companies too have tied up with NCDEX in order to extend pledge finance. This initiative over a period of time could become an important tool to improve the credit access to agricultural producers. Productive reforms like this can push Indian agriculture to the next level.