IT, realty stocks drag the markets

Mon, 8 Nov 09:30 am

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Asian markets have opened this week on a mixed note. While selling is seen in China and Hong Kong, Japanese stocks are trading in the positive. As for the Indian markets, these have also opened slightly in the negative. IT and realty stocks are leading the weakness currently.

The BSE-Sensex is trading lower by around 40 points (0.2%), while the NSE-Nifty is down about 20 points (0.3%). Mid and small cap stocks are also trading in the negative with the BSE-Midcap and BSE-Smallcap indices weaker by 0.4% and 0.3% respectively. The rupee is trading at 44.24 to the US dollar.

Power stocks have opened on a mixed note. While gains are seen in Reliance Power and GVK Power, selling pressure marks trading in NTPC and Power Grid. Following the huge success of the IPO of India's largest coal mining company Coal India, the government is now eyeing a rich harvest through India's largest power transmission company. Power Grid (PGCIL) is coming out with its follow-on public offer (FPO), and the same opens for subscription tomorrow. The FPO has been priced at Rs 85-90 per share, almost 12-17% discount to PGCIL's last closing stock price. And this is the reason the stock has corrected today. Anyways, at the higher level of the price band, the FPO will raise around Rs 76 bn. Half of this amount will flow to the company through issue of fresh shares, and the other half will go to the government through its offer for sale. From the funds to be raised through fresh issue (around Rs 38 bn), the company plans to utilise it to fund its expansion plan.

PGCIL's total capex for the next few years is estimated at a mammoth Rs 500 bn, so this issue will just part fund the equity portion of this planned capex. The last time that PGCIL had raised money through a public issue was in September 2007, when it had issued its stock at Rs 55 per share.

Engineering stocks have opened weak today. The top losers include Crompton Greaves, Punj Lloyd and Suzlon Energy. As per a leading business daily, L&T is said to be eyeing a US$ 300 m deal from the Sohar refinery project in Oman. This refinery is the largest in Oman, and has a capacity of 116,000 barrels per day (bpd) which it plans to increase to 190,000 bpd going forward. L&T is already working on several projects, ranging from road construction to power plant setup in Oman, and is thus seen as a frontrunner to bag this refinery project. The company had recently reported a decent performance for the quarter ended September 2010 (2QFY11). Therein, the company's sales had grown by 18% YoY while net profits were up around 32%. L&T benefited from a slight expansion in operating margins and a substantial rise in other income, which was up 70% YoY during the quarter. The company's order backlog stood at a huge Rs 1.15 trillion, which provides it with a good growth visibility in the future.