Indian share markets open weak

Thu, 8 Nov 09:30 am

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All major Asian stock markets have opened the day on a weak note with stock markets in Japan (down 1.6%), Hong Kong (down 1.4%) and South Korea (down 1.3%) leading the losses in the region. The Indian share markets have also opened the day on a weak note. Stocks in the power, banking and IT space are leading the losses.

The Sensex today is down by around 90 points (0.5%), while the NSE-Nifty is down by around 30 points (0.5%). Mid and small cap stocks are also trading in the red with the BSE Mid Cap and BSE Small Cap indices down by around 0.3% each. The rupee is trading at Rs 54.58 to the US dollar.

Aluminium stocks have opened the day on a weak note with National Aluminium Company Ltd (Nalco), Hindalco Industries, and Sterlite Industries leading the losses. Recently, it was announced that the government was planning to divest 12.5% stake in state-run aluminium firm Nalco. It was said that the stake was likely to fetch the government about Rs 15 bn. However, the plan was deferred by the government yesterday on account of concerns over the company's financial performance. It was worth noting that during the quarter ended September 2012 (2QFY13) while the company's sales remained almost flat on a year-on-year (YoY) basis, net profits plunged by 96.6% to Rs 47.8 m against Rs 1,393.4 m in the corresponding quarter of the previous financial year (2QFY12). The steep decline in profitability was attributable to disruption in its coal supply which forced the company to buy imported coal. It must be noted that less than a month ago the divestment of Rashtriya Ispat Nigam Ltd (RINL) was deferred indefinitely after the steel ministry felt that the issue price recommended by merchant bankers was too low. In the case of Nalco too, the government wants to strengthen the financial performance so that the company can fetch better valuations.

Auto stocks have also opened the day on a weak note with Ashok Leyland, Maruti Suzuki and Hero MotoCorp trading in the red. However, Tata Motors is trading firm. India's leading automotive company, Tata Motors, has announced its financial results for the quarter ended September 2012 (2QFY13). During the quarter, the company's consolidated net sales stood at Rs 428,189 m, higher by 19.1% YoY. At the bottomline level, the consolidated net profits grew by 10.5% YoY to Rs 20,747.3 m. The growth at the consolidated level was driven by strong volumes from UK-based subsidiary Jaguar Land Rover (JLR). During the quarter, JLR reported net profits of 305 m British pound sterling (Rs 26.5 bn), higher by 77.3% YoY. However, on a standalone basis, the company's performance was affected by the ongoing slowdown in the Indian automobile industry. The standalone net sales declined by 3.8% YoY to Rs 123,964.6 m. Net profits zoomed up by over 8 times to Rs 8671.1 m in 2QFY13 from Rs 1,020.2 m in 2QFY12. However, the jump in standalone net profits was due to dividend income of about Rs 13,120 m from JLR. In absence of the dividend income, the company would have reported a loss at the standalone level.