India up on positive Asian cues

Mon, 21 Mar 09:30 am

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After falling heavily in the previous week, Asian stock markets have opened the day in the significant gains. Stock markets in Japan (up 2.7%), Hong Kong (up 1.3%) and Singapore (up 1%) are leading the pack of gainers. On the same lines, Indian stock markets have also opened the day on a firm note. Stocks from the FMCG and consumer durable space are trading firm. However, stocks from the oil & gas and realty space are trading weak.

The BSE-Sensex is trading higher by around 71 points (0.4%), while the NSE-Nifty is up by around 21 points (0.4%). Mid and small cap stocks are also trading firm, with both the BSE Midcap index and BSE Small cap index up by 0.4% each. The rupee is trading at 45.02 to the US dollar.

Steel manufacturers have opened the day on a firm note with SAIL and Tata Steel trading in the green. Prices of iron-ore have come down for the first time in five years. Iron-ore is an essential raw material for the manufacturing of steel. The prices have come down as several Japanese firms have cut down the production of steel. As a result, the demand for the key input iron ore has come down leading to softening in prices. The Japanese steel mills account for nearly 13% of the global iron-ore consumption. As a result, these firms sort of set the benchmark for iron-ore prices globally, including for India. If prices of iron-ore were to come down, then it would lead to stronger margins for the steel makers. However, most steel makers view this as a short-term phenomenon. As and when Japan starts the massive task of rebuilding, prices would shoot up again as demand for steel and other metals would go up. But for the short term, looks like the steel manufacturers would enjoy better margins.

Auto stocks have too opened the day on a firm note with Ashok Leyland, Hero Honda and M&M leading the gains. The Hero Group is planning to raise Rs 36.5 bn by selling 29% stake in Hero Investments Pvt Ltd (HIPL), a promoter firm of Hero Honda, to two private equity (PE) firms. Recently, the Group had signed definitive agreements with two PE firms. The Foreign Investment Promotion Board (FIPB) had recommended the proposal to the Cabinet Committee for approval since it involves foreign investment exceeding Rs 12 bn. Once the necessary clearances are acquired, the two PE firms will collectively buy about 29% stake in HIPL.

HIPL holds 17.3% stake in the company as on December 31, 2010. The BM Munjal-led Hero Group is to pay Rs 38.4 bn to buy out Honda's 26% stake in their joint venture Hero Honda which will raise HIPL's stake in Hero Honda to 43.3%.