The Indian markets drifted into the negative region as selling activity intensified during the previous hour of trade. Currently, stocks from the IT, banking and power sectors are leading the pack of losers, while those from the metal and energy spaces are finding some favour.
The BSE-Sensex is trading lower by about 50 points (down 0.3%, while the NSE-Nifty is trading lower by about 18 points (down 0.3%). However, stocks from the mid and smallcap spaces are seeing some interest as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.3% respectively. The rupee is trading at 46.88 to the US dollar.
Auto stocks are currently trading firm led by Hero Honda, M&M and Ashok Leyland. On the back of seeing a faster than expected turnaround in demand, activity at India's Maruti Suzuki's four plants are running at very high utilisation levels. At the end of FY09, the company had an installed capacity of 1 m units. During FY10, the company sold more than 1 m units, which means it was working at over full capacity. The company's fifth plant, which will have an annual capacity of producing 250,000 units per annum is expected to be commissioned in 2012. As such for the time being, the company is seeing to free up any available space at its mega plants for increased production. A leading business daily has reported that Maruti has put in place an innovative programme by which it is increasing the production capacity by 20% YoY. This basically means that the company is aiming at utilising its assets by 120%. It is reported that the investment for this change is about Rs 1.3 bn. As per the management, one of the many ways to achieve this target is to go in for flexi-lines. This basically means that the company is looking at increasing the number of models that can be assembled on a single line.
Recently, the company also reported that it mulling setting up a sixth unit (at Manesar) with the capability of producing 250,000 units a year. However, these plans are yet to be finalised by the company's board.
Power stocks are trading mixed with Reliance Infrastructure and Tata Power leading the pack of losers. However, GVK Power & Infrastructure and PGCIL are trading flat. As per a leading news daily, state owned power companies PFC, REC, NTPC, PGCIL and NHPC have plans to enter the banking business in order to access cheaper funds. These PSUs are looking at the possibility of forming a public sector bank. All the power PSUs are expected to meet the RBI soon for a discussion regarding the issuance of new banking licences. If all the power PSUs are given the banking status they would have to follow the RBI guidelines pertaining to cash reserve ratio, statutory liquidity ratio and priority lending. Once conferred the banking status, these PSUs will no longer exclusively lend to the power sector.