Markets off to a strong start

Wed, 25 Nov 10:30 am

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Although the Indian markets opened below the breakeven mark, they have managed to breach the dotted line since then to enter into positive territory. Asia is currently trading a mixed bag with Taiwan (up 0.4%) leading the pack of gainers, while China (down 0.2%) is among the major losers. The US markets closed lower by 0.16% yesterday. Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with auto and metal stocks leading the pack of gainers. However banking and power majors are in the red.

The BSE-Sensex is trading higher by 71 points, while the NSE-Nifty is up by 10 points. Buying interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.8% each. The rupee is trading at 46.32 to the US dollar.

Software stocks have opened the day on a mixed note. While Infosys is in the green, Wipro and TCS are trading weak. As per a leading business daily, software major Infosys plans to acquire companies in the consulting and healthcare spaces in the range of US$ 400 to US$ 500 m. The company is looking at buyouts with a strong presence in Europe, although it is also open to US centric firms. Infosys believes that such an acquisition will strengthen its geographical presence as well as its consulting base.

In our view, this development is positive due to the fact that clients are increasingly demanding more advisory related work. Such an acquisition will also not strain Infosys' resources as it had cash reserves of about US$ 2.8 bn on 30th September, 2009. It may be noted that consulting and enterprise solution business together accounts for about 25% of the company's revenues at present.

Auto stocks have opened the day on a positive note. Gainers here include M&M and Maruti Suzuki. As per a leading business daily, Tata Motors plans to launch an electric version of its passenger car Indica in India in early 2011. The company is launching the product in Europe around that time. The company will conduct a feasibility study prior to launching it in India. Although electric cars are the latest trend around the world, we believe that there are several hurdles to cross before it can take off in India. Such cars are more expensive depending on the battery technology and India is a highly price sensitive market. But the biggest stumbling block would be steady availability of electricity, something in which India has a long way to go.