Auto, realty stocks aid the rise

Thu, 24 Dec 12:30 pm

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After remaining choppy for most of the early session, the Indian benchmark indices managed to tread higher during previous two hours of trade. Buying in index heavyweights has helped most of the sectors to remain in the positive lead by consumer durables, realty and auto sectors. However select stocks from IT and telecom sectors are bearing the brunt of profit booking.

BSE sensex and NSE Nifty traded in the green, up by 43 point and 10 points respectively. The BSE-Midcap and BSE-Smallcap are trading up by 1% each. The rupee is trading at 46.76 to the dollar.

As per a leading business daily, the Steel Ministry of India is seeking powers to grant iron ore mining lease and allocate mineral concessions for iron ore and other ores used in the steel industry. This move is in order to accelerate the execution of steel projects which are usually stuck because of dearth of assured long-term raw material supplies. As per the existing law, this authority rests only with ministry of mines. However the steel ministry claims that it is better suited to make the strategic decision about mineral concessions as it is more aware of the requirements of the domestic steel industry.

It may be noted that India's annual per capita consumption of steel is just 45 kg as compared to the global average of 150 kg. The steel industry is given responsibility to raise the consumption to the global standards for which it needs to ensure that domestic steel making capacity keeps pace with the demand. As per estimates Indian steel production is slated to reach 124 m tonnes by 2012 and 295 m tonnes by 2020.

According to the research conducted by IT research firm Springboard,India's domestic market for IT services is expected to grow annually at a rate of about 19% to reach US$ 13 bn by 2013. Indian IT services market which stood at US$ 5.7 bn at the end of FY09 is all set to gather more mass and reach substantial size in the 3-4 years. Most of this growth is expected to come from the infrastructure management services where IT vendors maintain and manage clients IT infrastructure in terms of hardware, software and services. This segment is expected to reach US$ 7.2 bn, garnering a lion's share of 53% of the entire domestic IT market by then. However, high end services like consulting will show muted growth amounting to only 5% of the market. In terms of industry verticals, banking and financial services are expected to reign in the domestic market as well. They are expected to amount to 21% of the market, followed by public sector and telecom segments.

It may be noted that Indian IT market is more or less at par with the global levels in terms of average gross margins. So we believe that there is a sea of opportunities for the small and big IT companies which aim to de-risk their revenues from the western economies. However the business model can be a little different in case of operating with the Indian clients. IT companies need to prepare themselves for that.