India off to a weak start

Thu, 17 Dec 10:30 am

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The Indian markets have started on a weak note. The benchmark indices opened above the breakeven mark but soon slipped below the dotted line. However, they have managed to pare their losses since then. Asia is currently trading a mixed bag with China (down 1.4%) leading the pack of losers, while Indonesia (up 0.5%) is in the green. The US markets closed lower by 0.1% yesterday.

Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with software stocks leading the pack of gainers. However, power majors have failed to garner investors' interest. The BSE-Sensex is trading lower by 32 points, while the NSE-Nifty is down by 8 points. Selling interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.5% and 0.8% respectively. The rupee is trading at 46.78 to the US dollar.

Auto stocks have opened the day on a mixed note. Gainers here include Bajaj Auto and M&M, while TVS Motor is in the red. As per a leading daily,Tata Motors and M&M are interested in taking over the Termini Imerese plant owned by Italian auto major Fiat. They will be in competition with Chinese companies who have also shown interest in the facility. It makes a three-door hatchback called 'Lancia Ypsilon' and can produce 400 cars per day. Fiat is planning to relocate its manufacturing to lower cost centres like Poland or Germany despite support from the local government to prevent job losses. Ironically, Fiat's operations in India are expanding at a time when the outlook is bleak back home. While it is early to say whether Tata Motors or M&M will bag the plant and on what terms, we believe the development once again highlights the coming of age of the Indian auto industry.

Steel stocks have opened the day on a positive note. Gainers here include SAIL and Tata Steel. Given the abundance of the mineral resources, the eastern part of India is ideally suited for the manufacture of steel. Unfortunately, it also the centre stage of agitation over land acquisition. As a result, companies planning to set up new steel projects are beginning to look elsewhere. As per a leading business daily, most of them are looking at Karnataka. ArcelorMittal is in talks for a 6 million tonne (mt) plant. Posco is also interested in a 4mt to 6 mt plant. Both of them have waited for a long time in Jharkhand and Orissa respectively. In fact, projects totaling up to 35 mt are lined up in Karnataka. That is despite the fact that its iron reserves are only half of that of Jharkhand, Orissa or Chhattisgarh. In our view, the eastern states must wake up to the fact that industry cannot wait indefinitely due to land acquisition issues. There are more investment friendly states in India who will welcome them.