Banks,metals weigh heavy on markets

Mon, 14 Dec 02:30 pm

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Unabated selling activity in index heavyweights made the benchmark indices nosedive below the dotted line during the previous two hours of trade. Currently, selling activity is being witnessed across sectors led by stocks from the banking, consumer durables, metal and FMCG sectors. However, capital goods, IT and auto sectors are managing to garner investors’ interest.

The BSE-Sensex is trading down by around 33 points and the NSE-Nifty is down by around 13 points. Currently, the BSE-Midcap and BSE-Smallcap indices are trading marginally lower by 0.6% and 0.4% respectively. The Rupee is trading at 46.70 to the Dollar.

According to a leading business daily, India’s largest private sector power utility, Tata Power is all set to enter the hydroelectric power segment in Bhutan. It has started construction of the 114 MW Dagachhu hydel power project in a 26%-74% partnership with the Bhutanese government. The entire project will take around 4 years to complete and the first unit of 57 MW is expected to be commissioned in 2013. The company will fund this US$ 202 m project trough loans secured through various banks and equity.

The necessary clearances, environmental approvals as well as the project design are already in place. The contracts for civil work and construction equipments have also been awarded. Tata Power has signed a long-term power purchase agreement with the Bhutanese government for evacuation of power from the project. As per this, after fulfilling Bhutan’s local power needs, the entire power will be evacuated to India through the Tata Power Trading Company. It may be noted that the company has recently shifted focus towards renewable power sources and plans to increase its generation capacity by investing around Rs 236 bn in capex over next 3 years.

As per a business daily, cement major, ACC does not expect any slowdown in the demand for the commodity on account of prospective rollback of government stimulus. It may be noted that due to the cut on excise duty, cement companies were able to save Rs 4 to 5 per bag which was passed on to the customer. However as the government might roll back these excise cuts in the next Union Budget, the price of cement and related products are expected to move northward. However, ACC does not expect this to impact the retail demand for the cement. It is for this reason it plans to invest Rs 15 bn in capex during 2010 especially in its readymade concrete (RMC) segment which mainly caters to the Indian real estate sector. The company will be expanding the capacity at its Karnataka (Wadi) plant from 5.8 mt to 8.8 mt by April 2010.

We believe that while the government’s initiatives in the infrastructure and housing sectors are likely to be the main drivers of growth for the cement industry in the long run, an intermittent slowdown in real estate could hurt realizations for the commodity.