Cautious undertone maintained

Fri, 8 Oct Closing

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In line with the trend for the day, the broader markets moved within a narrow range during the closing hours of trade. Although the indices managed to come off the day’s lows, they still closed the day slightly below the breakeven line. To be more specific, the Sensex edged lower by around 65 points today (down 0.3%) whereas the NSE Nifty lost in the region of around 15 points (down 0.2%). BSE Midcap and small cap indices also inched lower, losing 0.5% and 0.3% respectively. Around 2 stocks declined for every one that gained on the Sensex today.

With the exception of Chinese and Hong Kong stocks, all other key Asian indices closed lower today whereas Europe is also trading mostly in the red currently. The rupee was trading at Rs 44.4 at the time of writing.

With the Sensex still above 20,000 mark currently and looking richly valued on a historical basis, there seems little reason for investors to take it still higher in a short span of time. What more, with even the FIIs turning cautious on account of the breakout of currency wars and the impending quarterly results, the indices will likely keep moving in a narrow range for quite some time to come. Infact, it will not be wrong to say that the bias is still on the negative side and it is going to take some real good news of note to bring about a meaningful rise in the index levels.

NTPC, the domestic power behemoth closed slightly lower today. As per a leading daily, the company has been invited by the State of Punjab to set up a Rs 150 bn power project, the largest in the state so far, over the next three years. The plant is likely to have a capacity of around 2,640 MW. The Punjab Government has agreed to facilitate the acquisition of land, allocation of water and has conveyed the in-principle clearance for about 2,316 acres and 125 cusecs of water for the thermal plant. At least 50% of the power from the plant will be allocated to Punjab. It should be noted that NTPC has a target to augment power generation capacity to 50, 000 MW by the end of March 2012 and further to 75,000 MW by the end of 12th plan in March 2017.

Dabur India, one of India’s biggest homegrown FMCG majors is looking at adopting the franchise route for its retail stores ‘Newu’ and also explore smaller format stores in order to expedite expansion, highlighted a leading business daily. H&B Stores Ltd, the subsidiary in charge of operating ‘Newu’ stores makes a negligible contribution to Dabur’s topline currently and has not really made a mark for itself on the profitability front. However, all this could change as the company is planning a big bang expansion and is looking to open up to 150 new stores in FY12 and also enter western region. The franchise route will indeed help the company expand rapidly and also help lower the breakeven point dramatically on account of the low investment it entails. The stock closed lower by around 2% today.