Markets up on strong Asian cues

Mon, 30 Nov 10:30 am

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The Indian markets opened way above the breakeven mark, and have not shown any signs of a negative movement since then. This is in line with Asian markets which seem to have bounced back from the Dubai debt debacle. Asia is currently trading in the green with Hong Kong (up 3.3%) leading the pack of gainers. The US markets closed 1.5% lower last Friday.

Currently, in India, heavyweights from the BSE-Sensex are trading in the green with auto and metal stocks leading the pack of gainers amidst broad based buying activity. The BSE-Sensex is trading higher by 238 points, while the NSE-Nifty is up by 78 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 1.6% and 1.8% each. The rupee is trading at 46.39 to the US dollar.

Energy stocks have opened the day on a positive note. Gainers here include GAIL and Gujarat Gas. As per a leading business daily, exploration and production major ONGC has found traces of a new oil reserve in Gujarat. The new field is located onshore (i.e. on land as opposed to in the sea) in the Mehsana area. It may be noted that the company’s largest onshore field currently is also located in the same area. While the existing field produces 2.2 m tonnes per annum (mmtpa), the new location will generate about 1 mmtpa. There is a possibility that it might even produce up to 2 mmtpa. It is estimated that about 500 wells will be drilled at a cost of about Rs 5 bn for the location. In our view, this is a positive development for ONGC as it has been struggling to maintain production from onshore fields. Onshore fields are much more economical than offshore fields to produce from because of which they yield better margins for the producer.

Pharma stocks have opened the day on a positive note. Gainers here include Wockhardt and Dishman Pharma. As per a leading business daily, Wockhardt and DBS Bank have agreed to an out-of-court settlement of a dispute over loans. The bank had recently filed a petition in the Bombay High Court to liquidate Wockhardt in order to pay off dues to its creditors. As per the new agreement, DBS Bank’s derivative exposure of Rs 910 m in the drug maker has been settled at a 75% discount, while its working capital exposure of Rs 440 m has been settled at Rs 370 m. It may be noted that Wockhardt has debt of over Rs 37 bn on its books and is under a corporate debt restructuring program, with 14 banks participating. Although the agreement with DBS Bank is yet to be approved by the participating banks, we believe this is a positive development for Wockhardt as it helps reduce its debt burden.