Markets rally on consumer durables

Fri, 10 Dec 11:30 am

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Indian indices have made a recovery and are trading in the green on buying interest in heavy weights during the last two hours of trade. Stocks from the consumer durables and realty space are the maximum gainers while stocks from the IT and auto space are the minimum gainers.

The BSE-Sensex is up by 233 points while NSE-Nifty is trading 72 points above the dotted line. BSE-Midcap is trading up by 2.6% while BSE-Smallcap index is trading 2.5% above yesterday’s closing. The rupee is trading at 45.23 to the US dollar.

Auto stocks are trading firm led by Escorts and Ashok Leyland. As per a leading financial daily, Tata Motors, inorder to boost sales of Nano, has launched a plethora of incentives. These include a longer warranty period, low cost maintenance and up to 90% finance at easy rates to buy the car.

The warranty which earlier was for 18 months or 24,000 km (whichever was earlier) has now been extended to 48 months or 60,000 km (whichever is earlier). This new warranty would be applicable for both new and existing customers. Furthermore, all new customers will have the option of availing a comprehensive maintenance contract for only Rs 99 per month. These offers have been launched a week after Tata Nano's November sales figure declined by 85% YoY. It may be noted that Tata Motors was able to sell only 509 units of the Nano in November.

The demand for the small car has been falling on reports of a technical snag. After the recent price increase, the on road price of the car comes to between Rs 150,000 to Rs 200,000. As a result people are opting for the Alto. This is because the lower middle class does not change its car every year and hence the brand has to be more reliable.

Metal stocks are trading firm led by Adhunik Metaliks and Tata Sponge. However, Maharashtra Seamless is trading weak. Novelis Inc, a subsidiary of Hindalco Industries Ltd, is planning to raise US$ 2.5 bn through bond sale. Hindalco is set to receive US$ 1.7 bn from the proceeds of the issue. The infusion of capital is likely to be a major positive for the company as it is in the midst of a major expansion plan entailing a capex of Rs 400 bn in India. It may be noted that Novelis Inc was acquired by Hindalco in 2007. Post the acquisition, the global financial crisis saw the subsidiary ailing. However, Hindalco used its balance strength to restructure the debt mountain at Novelis. And now when the subsidiary has posted a turnaround by registering a net profit for FY10, Hindalco has cashed in the cheque at the right time.