The Indian markets continued to trade on a strong note during the previous two hours of trade. Currently, buying activity is being witnessed across all sectors with stocks from the oil & gas, consumer durables, FMCG, realty, auto and power sectors leading the pack of gainers. Banking stocks are the only ones to be at the receiving end.
The BSE-Sensex and the NSE-Nifty are currently trading higher by around 96 points and 25 points respectively. Stocks from the midcap and small cap spaces are trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 0.5% and 0.6% respectively. The rupee is trading at 45.46 to the US dollar.
According to a leading business daily, India's largest IT exporter TCS' big government IT project in UK is caught in political crossfire. It may be noted that recently, TCS won a £600 m (or Rs 41 bn) IT project from UK's National Employment Savings Trust. However, the major opposition political party in UK, the Conservative Party has criticized the current government for signing such an important deal too close to the general elections which are scheduled for June 2010. It has vowed to review the contract if it comes to power.
It is worth noting that this multi-year project is structured in two phases. The first phase which is due for completion in October 2010 requires TCS to commit actual resources and manpower. This phase will generate revenues around £25 m for TCS for setting up and maintaining the IT infrastructure for the project. However, the government authority that awarded this project to TCS has said that the opposition can choose to discontinue with TCS after the first phase if it deems it relevant after coming to power. While there is a lot of uncertainty about this event, losing a Rs 41 bn contract will definitely harm the company's quest to become an established player in UK's IT market. We hope that the Indian IT major which has renewed its focus on government as a business vertical is already prepared for such bottlenecks like change in leadership and delays while working with governments round the world.
The cement demand in Eastern states of India is growing at a remarkable pace. The demand for cement in this region grew by 24% in the period from April 2009 to December 2009, outpacing the national average growth of 11%. This sudden hike in the cement demand in the region has resulted in a rise in price of cement by Rs 13 per bag post the Union Budget. In contrast the price is falling in the other parts of the country on account of over capacity.
All this has attracted the focus of all the major Indian cement players towards the eastern side of India. Cement majors like ACC, Dalmia Cement, Binani Cement are making a beeline for increasing their presence in the states of West Bengal, Jharkhand, Chhattisgarh, Bihar and Orissa. While these majors are expanding their capacities in the region, they are also making strategic investments in the local players in order to secure supplies and improve profitability. It may be noted that with an installed capacity of 240 m tonnes, the Indian cement industry is second only to China in terms of growth rates. While the Indian cement industry is growing at 9-11% for the past couple of years, its Chinese counterpart is standing tall at a growth rate of 14%. We believe that incremental cement capacity in regions with undersupply will aid the cement majors in maintaining their growth rates going forward.