Hindalco strong on higher metal prices

Wed, 17 Feb 01:30 pm

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Although trading well above the dotted line, the Indian markets witnessed some volatility during the previous two hours of trade. Currently, buying activity is being witnessed across all sectors with stocks from metal, consumer durables, auto and capital goods sectors leading the pack of gainers. IT stocks, however, are currently seeing some pressure as the BSE-IT Index is trading marginally lower.

The BSE-Sensex and the NSE-Nifty are currently trading higher by around 180 points (up 1.1%) and 55 points (up 1.1%) respectively. Stocks from the midcap and small cap spaces are also trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 1% each. The rupee is trading at 46.03 to the US dollar.

Metal stocks are in demand today with Hindalco, Tata Steel and JSW Steel leading the pack of gainers. Trading higher by about 5.5%, the stock of Hindalco was the top amongst stocks forming part of the BSE Sensex Index at the time of writing. In fact, almost all the metal stocks are currently trading in the green. Gains in these stocks are on the back of a rise in metal prices on the London Metal Exchange (LME) yesterday. It is reported that a gauge of six metals jumped by about 4.2%. While aluminium prices are flat today, yesterday they were higher by about 4% as well. Gains in Hindalco are also seen on reports that the company is hoping to complete raising Rs 49 bn of debt within the next two weeks to achieve financial closure for its Utkal Alumina refinery. This refinery will have a capacity of about 1.5 m tonnes per annum and is located in Orissa.

It must be noted that the stock of Hindalco has ended in the green during the past four days. While higher aluminium prices are one reason, investors have also been favouring this stock on the back of the optimism that the government will boost infra spending, leading to spur in demand, in its annual budget next week.

Auto stocks are currently trading firm led by Eicher Motors, Bajaj Auto, M&M and Maruti Suzuki. A leading business daily has reported that Tata Motors is looking to venture into manufacturing bullet proof combat vehicles for the defence sector. The company will manufacture light bullet proof vehicles for the Indian army. For the same, it is expecting a possible order of about Rs 3.5 bn. In addition, the company also launched an anti-mine vehicle that will be used by the Indian Army, paramilitary and police forces. It may be noted that the company’s peer group M&M and Ashok Leyland also have a presence in this business.

In another development, the company recently announced that it has cut down production of its commercial vehicles by about 5% to 10% due to a shortage of certain key components such like radial tyres. This issue is however not limited to Tata Motors. Ashok Leyland is also believed to have cut down production due to the same reason. The reason cited for this shortfall is that of the auto component suppliers not being able to match up the expansion that the OEMs have done. However, Tata Motors expects the scenario to improve within a few weeks as it is working with its suppliers to resolve this issue. In addition, the management of the auto firm is also planning to hike prices of its CVs by about 1% to 2%. This is to offset the cost of new diesel engine technology that will be introduced in order to meet the new emission standards effective from April.