Auto and banks lead the rally

Fri, 4 Mar 01:30 pm

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After trading with healthy gains during the previous two hours of trade Indian indices have consolidated and are currently trading flat. Stocks from Auto and Banking space are trading strong while those from Consumer Goods and Metals’ space are trading weak.

Currently, the BSE-Sensex is up by 90 points while NSE-Nifty is trading 25 points above the dotted line. BSE Midcap and BSE Small cap indices are both up by 0.30% and 0.27% respectively.

Paint stocks are trading weak with Asian Paints and Kansai Nerolac leading the pack of losers. However, Berger Paints is trading strong. Amidst rising input cost, domestic paint makers are all set to increase the prices for decorative paints for the fifth time in this financial year. The price hike will be in the region of 1-2%, thus taking the overall rise to about 12% in this fiscal. Prices of key raw materials like titanium dioxide, vegetable oils and monomers, which account for almost 60% of the overall production cost, have witnessed a steep rise in the last one year. Out of all the key raw materials, price rise in titanium dioxide is of significant worry as the supply side constraints are not expected to be resolved soon. Further, it may be noted that rising input cost has a material impact on the industrial paint segment as passing on the rising prices is difficult because of the long term fixed-nature of the contracts entered with the customers. This can pressurize overall margins of the paint companies .

Power stocks are trading firm with PTC India and Reliance Power leading the pack of gainers. However, Coal India and Power Grid Corporation are trading weak. In order to provide feedstock for its expanding capacity, NTPC is likely to float a tender to import 4 m tones of coal. NTPC generally relies on government firms like MMTC and STC to meet its imported coal requirements. For the next fiscal, the company has an expected coal (imported) requirement of 16 m tones out which 12 m tones has already been arranged. As a result, the company plans to float a tender for the balance requirement. Although India has 10% of the world’s coal reserves the imports have been growing rapidly due to planned increase in power capacity . Further, about half of the power plants in India are coal-fired which increases the demand for coal. It may be noted that NTPC’s coal requirements is set to rise further considering the capacity expansion plans that have been lined up for the future.