Banks help recover losses

Fri, 26 Nov 01:30 pm

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Indian indices have recovered their losses over the previous two hours and are currently hovering near the dotted line. Heavyweights in the Sensex are trading in the red as stocks from the realty and consumer durables space continue to be the biggest losers. However, stocks from the banking and IT space are trading firm.

Currently, the BSE-Sensex is trading down by around 25 points, while the NSE-Nifty is trading flat. The mid and small cap stocks continue to face significant selling pressure as both BSE-Midcap and BSE-Smallcap indices are trading lower by 2.7% and 3.8% respectively. The rupee is trading at 45.78 to the US dollar.

Auto stocks are trading in the red with M&M and Tata Motors facing significant selling pressure. However, Hero Honda is trading in the positive territory. Tata Motors plans to set up a second factory in Bangladesh, one of its main export destinations for commercial vehicles, to cater to growing sales of small and light commercial vehicles. The company has been a junior partner in a 60:40 joint venture with Bangladesh's Nitol Motors Ltd for nearly two decades. Nita Co. Ltd, which has been the sole distributor of Tata Motors' small, medium and heavy-duty trucks in Bangladesh since 1991, has an assembling unit for medium and heavy-duty trucks. The new factory, which will assemble models such as the Tata Magic, Ace and Iris, is expected to start production in six months. The facility will roll out 15,000 vehicles in the first year and reach 40,000 units in the next year. Currently, 25,000 commercial vehicles are sold in Bangladesh in a year. The market is expected to grow three-fold in four years to 70,000 units and Nita Co. Ltd may account for half the sales.

Food inflation numbers for the week ended November 13 stood at 10.15%. This figure is the lowest recorded in three months. Food inflation during the preceding week stood at 10.3%. This drop in the figure was led by lower prices of pulses and selected vegetables.

Food is an important component of the wholesale price index (WPI) as it has a weightage of nearly 14%. As such with the softening of food prices, the possibility of the WPI moving towards the government's target is there. The WPI stood at 8.6% in the month of October. The government expects inflation to ease to level of 6% by March 2011. Plus, with the food inflation easing, it does give the RBI a chance to take a wait and watch approach for hiking interest rates. The RBI has raised key policy rates as many as six times this year in order to calm rising prices.