Software stocks push markets lower

Thu, 12 Aug 09:30 am

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The Indian markets have started today's session on a negative note. The benchmark indices opened below the breakeven mark and have stayed in the negative territory. Other key Asian markets are in the red with Japan (down 2%) leading the pack of losers. The US markets closed lower by 2.5% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading weak with software and metal majors facing the brunt of selling activity. The BSE-Sensex is trading lower by around 130 points, while the NSE-Nifty is down by about 40 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 0.4% and 0.5% respectively. The rupee is trading at 46.68 to the US dollar.

Energy stocks have opened the day on a negative note. Losers here include Reliance Industries and Indraprastha Gas. As per a leading business daily, Reliance Industries plans to resume the sale of treasury shares held by its Petroleum Trust. In the next few days, the trust will offload around 40 m of the 120 m shares, which constitutes about 3.7 % stake, it holds in the company. The trust had got these treasury shares when IPCL was merged with Reliance Industries in 2006. The sole beneficiary of the trust is Reliance Industrial Investments and Holdings, a wholly-owned subsidiary of Reliance Industries. It may be noted that if the entire stock is sold before the end of FY11, there is likely to be a huge tax saving. This is because in the new Direct Tax Code long-term capital gains are proposed to be taxed at 15%, up from the tax free status currently. The new code is likely to take effect from FY12. The company had raised Rs 93 bn in three earlier rounds of treasury share sales, between January 2009 and January 2010.

Food stocks have opened the day on a weak note. Losers here include GSK Consumer and Britannia. As per a leading business daily, Nestle India plans to enter the mass segment of infant milk-based nutrition through low-priced products. Its existing infant nutrition products - Lactogen, Nan and Cerelac - cater to the premium segment of the market. This is part of the company's effort to widen its portfolio across categories like chocolates, infant nutrition and culinary products by expanding distribution and price points. It is also exploring some new categories including breakfast cereals and other innovations in chocolates and beverages. In fact, the company is increasing its manufacturing capacity for noodles at Ranjangaon, infant nutrition at Samalkot and milk at Moga. It will also invest Rs 3.5 bn to build a manufacturing plant for the Maggi brand at Nanjangud in Karnataka.