After beginning the day on a weak note, the Indian markets began drifting towards the dotted line during the previous two hours of trade. However, the indices are still trading in the negative zone. Stocks from the IT, capital goods and healthcare spaces are trading firm, while those from the auto and banking spaces are leading the pack of losers.
The BSE-Sensex is trading lower by about 35 points, while the NSE-Nifty is trading lower by about 15 points. However, stocks from the midcap and smallcap space are trading higher with the BSE-Midcap and BSE-Smallcap indices up by about 0.1% and 0.3% respectively. The rupee is trading at 44.63 to the US dollar.
Steel stocks are currently trading mixed with JSW Steel and Jindal Saw trading firm, while NMDC is one of the key losers. As per a leading business daily, Tata Steel plans to start work on its proposed multi-purpose special economic zone (SEZ) project near Gopalpur in south Orissa. The project has received the approval of the commerce ministry but was facing land acquisition problems. But they are expected to be resolved soon. It may be noted that Tata Steel had initially planned a mega steel plant near Gopalpur and applied for about 3,700 acres of land. However, it was shelved due to water, railway network and land acquisition problems. However, of late there has been progress on the land acquisition front. In fact, the SEZ is likely to begin on about 2,793 acres of land. In our view, if the SEZ goes ahead it will send a positive signal to an array of projects in India that are currently stalled due to land acquisition problems.
Auto stocks are currently trading weak led by Hero Honda, M&M and Tata Motors. India’s largest two-wheeler company Hero Honda had a good last year. The company’s sales volumes grew by about 23% YoY to about 4.6 m units during FY10. Volumes sales are expected to remain strong this year as well. While this is a positive for the company the fact that the company has an installed capacity of producing about 5 m units per annum will make it face some pressure during the current year. A leading business daily has reported that the projected double-digit growth in volumes this year will put pressure on the company considering that its factories have been running close to full capacity. As of now, the company has not lined up any plans of expansion. However, it is believed to be in talks with various state governments (including Tamil Nadu, Karnataka and Gujarat) to set up new factories. While the company expects to finalize the location of the new unit in a few months any delays would definitely hamper its sales volumes during the next year. Atleast for the current fiscal i.e. FY11, it is possible that the company can work beyond it capacities. As for market share, a lot depends on how much free capacities the other key players have as well.