Mkts manage to hold onto their gains

Mon, 28 Jun 11:30 am

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After starting today's session on a positive note, Indian indices have managed to hold onto their gains. Key Asian markets are trading mixed. Stocks from oil & gas and PSU space are trading seeing major buying interest while stocks from the banking space are seeing the least gains. FMCG stocks are trading in negative territory.

The BSE-Sensex is trading up by around 107 points, while the NSE-Nifty is up by about 33 points. Mid and small cap stocks are trading positive as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.6% and 1% respectively. The rupee is trading at 46.16 to the US dollar.

Bank stocks are trading flat now. Gainers here include Bank of Baroda and IndusInd bank. As per a leading news daily, SBI is likely to fix its base rate at around 7.75%. As per RBI guidelines, banks are free to choose any parameter to calculate their base rate until December. It is believed that most PSU banks are likely to follow SBI and fix their base rate between 8-8.5%. However, private sector banks are likely to fix their base rate in the region of 6-7.5% in order to attract corporate borrowers seeking short term loans. It should be noted that RBI introduced the base rate model to bring in more transparency in lending procedures. With base rate norms kicking in banks are worried that corporate borrowers will seek alternative sources of funding as no bank will be able to lend base rate.

Telecom stocks including Reliance Communications (RCom), and Idea Cellular are trading well in the green. RCom announced that it will combine its telecom towers business with GTL Infrastructure . This deal that will create a transmission network valued at Rs 500 bn. RCom's tower business is owned by its 95% owned unit called Reliance Infratel. The combined entity of Reliance Infratel and GTL, will create the world's largest independent telecom infrastructure firm. It will operate over 80,000 towers, with 125,000 tenancies from 10 telecom firms. It will have an enterprise value of over US$ 11 bn. RCom will receive a mix of cash and stock under the terms of the transaction, however exact terms are not disclosed.

RCom will be able to significantly reduce debt as well as leverage ratios after receiving the cash from GTL. Its debt before the deal stood at about Rs 330 bn, including the cost to finance its recent 3G spectrum licenses.