Sensex zooms on metal, realty stocks

Mon, 21 Jun 09:30 am

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The Indian markets have started today's session on a positive note, led by strong gains in stocks from the metal and realty sectors. The benchmark indices opened at the breakeven mark but soon surged into the positive territory. They have managed to hold on to their gains since then. Other key Asian markets are in the green with Hong Kong (up 2.7%) leading the pack of gainers. The US markets closed higher by 0.2% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with metal, banking and auto majors finding investors' favour. The BSE-Sensex is trading higher by around 220 points, while the NSE-Nifty is up by about 60 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 1.1% and 1.2% respectively. The rupee is trading at 46.03 to the US dollar.

Aluminium stocks have opened the day on a positive note. Gainers here include Hindalco and Nalco. As per a leading business daily, Hindalco's international subsidiary Novelis could bid for the rolled products division of global metals major Rio Tinto Alcan. The division is valued at roughly US$ 3 bn as per estimates. Rio Tinto has been selling assets to repay debt raised to acquire Canada's Alcan for US$ 38 bn in 2007. It sold its packaging business for US$ 1.2 bn earlier this year.

In our view, the bid is part of the Aditya Birla Group's plans to buy high value manufacturing products in Europe and the US. There are definite advantages of owning upstream assets such as bauxite mines and alumina refineries in Asia and Africa as well as acquiring downstream assets such as smelter technology from the West. It would insulate Hindalco from strong price fluctuations in bauxite and aluminium products.

Power stocks have opened the day on a positive note. Gainers here include Tata Power and NHPC. As per a leading business daily, the government is considering allowing public sector hydro electricity power companies such as NHPC and SJVNL to sell up to 50% electricity generated from their plants to the states where the projects are located. The actual percentage will be determined on the basis of state's electricity demand projections, paying capacity of its utility, and willingness of the state to enter into long term power purchase agreement. It may be noted that under the present regulations, such companies can only allocate a maximum of 30% of power from single project to the home state. This move aims at providing a level playing field to public sector hydro electric companies so that they are able to compete with their private counterparts who bag projects from state governments offering higher allocations to the home state.