Auto stocks lead morning gains

Thu, 21 Oct 09:30 am

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After yesterday's fall led by the Chinese interest rate hike, Asian markets have opened today on a mixed note. While gains are seen in Japan, selling pressure marks trading in China and Hong Kong. The Indian markets have opened in the positive. Currently, auto and energy stocks are leading the gainers pack.

Currently, the BSE-Sensex is trading higher by around 60 points (0.3%), while the NSE-Nifty is up about 25 points (0.5%). Mid and small cap stocks are also following suit with the BSE-Midcap and BSE-Smallcap indices trading higher by around 0.6% each. The rupee is trading at 44.32 to the US dollar.

Auto stocks are currently trading mixed. While gains are seen in TVS Motor and Ashok Leyland, selling pressure is seen in Eicher Motor and Bajaj Auto. Ashok Leyland announced a strong set of numbers for the quarter ended September 2010 yesterday. The company reported a 72% YoY growth in net sales led by higher volumes. Further, its operating profits improved by 85% YoY, aided by an improvement in operating margins to 11.3% during the quarter, from 10.5% in the corresponding quarter of the previous year. Net profits painted an equally good picture, as these rose a whopping 88% YoY, led by both good sales growth and better operating profitability. The company's performance for the first half (1HFY11) was even better, as net sales doubled and net profits trebled. Overall, Ashok Leyland has benefited from the recovery in demand for commercial vehicles in India. And this has been fueled by low interest rates and a return in consumer demand. Thus, while all seems hunky dory at this moment, rising interest rates could put a spoke in the wheels of the company.

Smiling in the glory of the success of the Coal India IPO, the government is now targeting to raise more money (till it is available in plenty) from the stock markets. And thus, it plans to US$ 1.9 bn through a follow-on public offer (FPO) from India's largest power transmission company, Power Grid. The FPO is likely to hit the markets in the second week of November, and will involve a 10% fresh issue by the company apart from a 10% stake sale by the government. As per the company's management, the proceeds from this issue will be utilised for part-funding the construction of nine nationwide high capacity power transmission corridors, which would involve a total investment of around US$ 13 bn. Anyways, the company announced its 2QFY11 results yesterday, wherein it has recorded around 25% YoY growth in sales while profits are up 42% YoY. The company's transmission income (91% of total) grew by 22% YoY during the quarter. The stock is currently trading in the red, accompanied by NHPC, Torrent Power, and Neyveli Lignite.