Healthcare, Realty stocks lead market recovery

Wed, 9 Oct 11:30 am

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After a weak start, the Indian stock markets recovered in the last two hours of trade. Buying in Healthcare and Realty sectors helped the market recovery.

The BSE-Sensex is trading up 20 points and the NSE-Nifty is trading up 6 points. The BSE Mid Cap index and BSE Small Cap index are trading up by 0.5% each. The Rupee is trading at 62.1 to the US Dollar.

Steel stocks are trading positive today. Adhunik Metals and Bhushan Steel are leading the gainers. Tata Steel is up 1.6% today. According to a leading business daily, Tata steel is planning to refinance its existing debt. For this purpose, it is looking to raise US$ 1bn from an overseas bond sale. It plans to launch the bond issue by 2013 end. Tata Steel has US$14.4bn of bonds and loans outstanding and the company will raise money to help refinance part of US$5 bn of debt which is due by 2015 end. Earlier this year, Tata Steel had cancelled its plan to issue bonds in dollars due to rupee depreciation and rise in yields. However, as per the latest data by J.P. Morgan Chase, average yields on Indian dollar-denominated bonds have declined. Therefore, the company is reconsidering its decision to raise money via issue of bonds.

Most IT stocks are trading lower today. Tata Consultancy Services (TCS) and Wipro are among the top losers. Indian IT firms, facing continuing uncertainties in their biggest market the US; have begun to increasingly focus on Europe. According to a leading business daily, Indian IT companies which are heavily reliant on the US market are eager to diversify their revenue stream geographically. They have therefore increased their efforts to penetrate the European market in a big way. While the push into Europe has been slow over the last three years, the pace has picked up recently. The latest example being the 5 year US$160 m contract awarded to TCS by Scandinavian Airlines. The rise in revenue from Europe is likely to be reflected over the next few quarters.

Europe accounts for roughly one third of revenue for India's IT services industry but Britain still accounts for most of it. Indian IT firms are now making inroads into those countries in continental Europe, especially northern Europe, where English is widely spoken. They have so far moved in to Europe via acquisitions, the latest example being the buyout of Swiss consulting firm Lodestone by Infosys. However they are facing serious problems in this effort; language barriers, tight labour laws and conservatism in IT budgets being the most important ones. Despite these concerns, IT firms want to focus on Europe for the large potential that it offers especially when the US is considering imposing strict laws regarding the outsourcing of local jobs to countries like India.