Realty, auto drive markets up

Tue, 1 Dec 02:30 pm

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The Indian markets continued to trade on a firm note during the previous two hours of trade. Currently, buying activity is being witnessed across sectors led by stocks from the realty, healthcare and auto spaces. However, IT and FMCG sectors are finding it difficult to garner investors' interest.

The BSE-Sensex and the NSE-Nifty are currently trading higher by around 203 points and 70 points respectively. Stocks from the midcap and small cap spaces are currently trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 1.5% and 2% respectively. The rupee is trading at 46.37 to the US dollar.

Engineering firms are trading on a mixed note. According to a leading business daily, engineering major Siemens will be merging Siemens Healthcare Diagnostics (SHD) with itself in this quarter. According to the agreement, two shares of Siemens (of face value Rs 2 each) will be swapped for one share of SHD (of face value Rs 10 each). Siemens India is a subsidiary of the US$ 112 bn German engineering behemoth Siemens AG, one of the largest engineering companies in the world. The company operates in many areas like power and industrial solutions service). In health care services, the company manufactures diagnostic equipments and hearing equipments. It may be noted that SHD focuses on the clinical chemistry and diagnostics business. With this merger, Siemens aims at becoming one of the leading integrated healthcare companies providing specialized diagnostic solutions in the Indian market.

Mahindra and Mahindra (M&M) which has business interests in software and hospitality amongst others is now looking to enter the defense space. M&M and global weapon system manufacturer BAE Systems have signed an agreement to create a joint venture defence company in India. This company will focus on land-based defense systems. Approved by the Foreign Investment Promotion Board earlier this year, the new company's initial investment will be US$ 21 m. M&M will hold 74% stakes and the rest of it will be with BAE. The present defence procurement procedure does not allow more than 26% FDI in the defence sector.

As on 31st March 2009, M&M had 97 subsidiaries, 4 JVs and 11 associates engaged in various activities. While it is a good thing to diversify in an attempt to suppress the cyclicality of the auto business, we believe that the company has spread itself too thin.