Markets see a post Christmas rally

Mon, 26 Dec Closing

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Indices in Indian stock markets had a relatively good outing today. They began the day on a positive note and consistently added to the gains throughout the session. The overall market breadth was positive with over two stocks gaining for every one that declined. While the BSE-Sensex closed higher by around 232 points (up 1.5%), the NSE-Nifty closed lower by around 65 points (up 1.4%). The smaller indices saw lower gains, even though they also posted a strong performance. While the BSE Mid Cap index rose 0.8%, the BSE Small Cap index gained close to 1%. Most indices closed the session in the green with IT and realty stocks notching the most gains. Healthcare stocks closed flat.

As regards global markets, most Asian markets were closed today on account of Boxing Day. However China closed in the red, and Japan in the green. All European indices were shut. The rupee was trading at Rs 52.80 to the dollar at the time of writing.

Electronics manufacturer Havells India, along with a Chinese partner plans to invest upto US$ 100 m over the next three years to set up a manufacturing facility at Jiangsu province in China. The new facility will be 50:50 joint venture (JV) between Jiangsu Havells Sylvania Lighting Co Ltd and China's Shanghai Yaming Lighting Co. The plant is expected to start initial commercial production in April 2012 and will have full swing output by November next year. The plant will produce lighting products like HID lamps, LEDs, CFLs, lighting fixtures, etc. The joint venture expects revenues of US$ 30 m in the first year itself and US$ 100 m over the next three years.

Power financier, Rural Electrification Corp (REC), has firmed up plans to raise US$ 500-600 m from overseas markets. The company had initially approached the divestment department in May with a proposal to raise US$ 1 bn through foreign currency convertible bonds (FCCBs). But this would have meant a significant dilution (over 10%) of the government's stake. It was then decided that a smaller amount would be raised, capping the dilution at 5-6%. REC's overseas bonds will have a tenure of at least three years and offer a coupon of 2% payable annually with no redemption premium at maturity. These bonds will offer as conversion price of a 30-35% premium to the stock price on the day the bonds are sold. However finding investors in the current market may be difficult for the company. Judging by historical date on companies which have experimented with FCCBs, the track record hasn't been great. Shares have usually failed to perform, and stocks were then trading at significant discounts to the promised conversion price.