Technology stocks in favor

Tue, 8 Mar 01:30 pm

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Indian stock market indices continues to trade positive on heavy buying in technology space. All Indian stock market indices are trading in the green. Stocks from technology and realty lead the pack of gainers.

The BSE-Sensex is up by 185 points while NSE-Nifty is trading 47 points above the dotted line. BSE Midcap and BSE Small cap indices are trading 0.8% and 0.7% higher respectively over yesterday's closing. The rupee is trading at 45.02 to the US dollar.

Stocks of steel companies are trading strong led by Bhushan Steel and Tata Steel. According to a leading financial daily, the steel major signed an agreement with Canadian iron ore miner New Millenium Capital Corp to develop two large iron ore deposits in Canada at an estimated investment of nearly Rs 220 bn. The two deposits hold over 9 bn tonne of reserves and resources that can potentially produce 22 m tonne of concentrate (pellets) per year. These reserves can make Tata Steel's European business self-sufficient in iron-ore. It will protect the steel major from the vagaries of the commodities market and provide cushion to its profit margins. At present the European business does not have any captive producing source for the two major raw materials: iron ore and coking coal.

Tata Steel's Indian business gets 100% of iron-ore and more than half of its coal from captive sources. This keeps it protected from the wide fluctuation in commodity prices and is the reason for its better operating profits vis-à-vis the profitability of the European business.

Leading micro finance institution, SKS Microfinance is trading weak. SKS Microfinance is in the process of securitizing Rs 7 bn of its loan portfolio in states other than Andhra Pradesh. SKS Microfinance will be the first microfinance institution to securitise its loan portfolio after the industry was hit by allegations of excesses by recovery agents and the subsequent MFI Regulation Act enacted in AP. The banks had almost stopped funding to the MFIs in the wake of the trouble in AP. The MFIs started seeing increasing defaults on account of the arising problem in receivables. However, the company claims business is normal outside AP and there should not be any problem in securitizing the Non-AP portfolio. The company has already securitized some deals of the Rs 7 bn and the remaining is in process of being securitized. According to the company the objective of the move was to raise funds and increase the capital-to-risk-weighted-assets ratio.