India up amidst weak Asia

Wed, 1 Dec 09:30 am

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Asian markets, with the exception of India and Korea, continue with their weakness today as well. In India, the markets have opened in the positive. Metal and auto stocks are leading the gains currently. FMCG and pharma stocks are however trading in the red.

The BSE-Sensex is trading higher by around 85 points (0.4%), while the NSE-Nifty is up about 25 points (0.4%). Mid and small cap stocks are also trading in the positive, with the BSE-Midcap and BSE-Smallcap indices up by 0.7% and 0.9% respectively. The rupee is trading at 45.75 to the US dollar.

The stock of Bharti Airtel has been going great guns over the past few weeks. In fact, it is the leading gainer among Nifty stocks over the past one month, when the broader markets have been very volatile. The stock's performance has been boosted by the issues surrounding the telecom industry. Investigations related to the spectrum scam and the government's statements suggest that the new operators face the possibility of cancellation of licenses. The new telecom minister has explicitly stated that all the erring operators would be punished. This is viewed as a positive for incumbent operator Bharti and Idea Cellular. Cancellation of licenses would result in a cooling-off of the intense competition in the sector. At present there are over 15 operators in the country. This has resulted in cut throat competition that has led to weaker realisations and margins for incumbents like Bharti.

Steel stocks have opened strong today. JSW Steel and Tata Steel are leading the gains currently. As per a leading business daily, India's steel industry is expected to grow strongly in the coming years on the back of a sustained demand from the infrastructure sector. Domestic steel consumption is seen doubling from the current levels to around 120 m tonne (MT) in the next five years. Further, consumption is seen rising to almost 200 MT by 2020. India is also expected to soon become the third largest steel consumer in the world after China and the US. As far as steel prices are concerned, these will be dependent on how the prices of key raw materials like iron ore and coking coal behave. As a matter of fact, these prices have been pretty volatile over the past few years, and have thus impacted the profitability of steel manufacturers despite the demand remaining good. Indian steel manufacturers however believe that steel prices will rise going forward in line with demand for the commodity. This is given their assumption that they will be able to pass on the input cost hike to customers.