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Realty, Metal & Auto Stocks in Demand
Mon, 3 Oct 01:30 pm

Indian equity markets continue trading higher during the post-noon trading session on the back of strong sales data from automobile manufacturers and positive global cues. Barring IT stocks, major sectoral indices are trading on a positive note with stocks from realty, metal and auto leading the pack of gainers.

The BSE Sensex is trading higher by 324 points (up 1.2%) while the NSE Nifty is trading higher by 107 points (up 1.2%). The BSE Mid Cap index is trading up by 1.9% and BSE Small Cap index is trading up by 2.1%. Gold prices, per 10 grams, are trading at Rs 30,766 levels. Silver price, per kilogram is trading at Rs 45,619 levels. Crude oil is trading at Rs 3,209 per barrel. The rupee is trading at 66.52 to the US$.

Automobile stocks are trading in the green with Escorts and Force motors leading the gains. As per an article in The Economic Times, Ashok Leyland is planning to introduce 8-10 products over the next 2-3 years. This launch in its light commercial vehicle (LCV) will involve an investment of up to Rs 4 billion.

The move comes after Ashok Leyland's separation from its partner, Nissan. The company stated that, there will be refreshes and upgrades to the existing products using Nissan technology. However, most of the future LCVs from Ashok Leyland will be developed in-house.

Notably, Ashok Leyland and Nissan Motor decided to part ways and agreed to sell its stake in three joint ventures to the Indian partner. As part of the pact, Ashok Leyland will continue to build, under a licensing agreement, Dost and Partner. Moreover, during May 2008, Ashok Leyland and Nissan had created three JVs, namely, Ashok Leyland Nissan Vehicles (ALNVL), Nissan Ashok Leyland Power Train (NALPT) and Nissan Ashok Leyland Technologies (NALT).

Overall, the end of the JV with Nissan might not impact Ashok Leyland significantly. That said, from a longer-term perspective, how Leyland plans to increase its footprint in the LCV space, will be the key thing to watch out for going forward.

Meanwhile, shares of Maruti Suzuki surged as much as 4.4% after it reported a strong 31% year on year (YoY) growth in its passenger vehicle sales in September 2016. The sales of 149,143 units as against a total of 113,759 units in September last year were reported on the back of highest-ever domestic sales.

On domestic sales front, the company reported a jump of 29.4% during September 2015. Its compact segment comprising Swift, Ritz, Celerio, Baleno and Dzire models clocked were up by 12.3%.

Meanwhile, other car makers such as Mahindra & Mahindra, Ford India and Toyota Kirloskar Motor also posted high single-digit growth rates September sales, the reports noted.

Moving on to the news from Engineering sector. A leading financial daily reported that, the construction arm of Larsen & Toubro (L&T) has won orders worth Rs 60.2 billion across various business segments. Out of the Rs 60.2 billion, Rs 25 billion worth of projects were from the Middle East.

L&T's power transmission and distribution business has received orders worth Rs 17.2 billion while the water and effluent treatment vertical has secured orders worth Rs 14.9 billion.

Further, its building and factories business also bagged orders worth Rs 11.3 billion in various sectors and the transport infrastructure unit bagged Rs 7.8 billion orders. Additionally, its heavy civil infrastructure and metallurgical and material handling businesses won orders for Rs 8.9 billion.

Notably, the company had confirmed projects for Rs 14.6 billion which included a project from Saudi Electricity Company earlier in the previous month.

Diversification continues to help L&T (Subscription Required) negotiate and get better terms and margins for projects. Apparently, this is because it is less desperate to win orders as compared to a company which are present in only a couple of sectors. Its reputation, extensive technical prowess, and large skilled workforce have enabled L&T to command a certain premium from customers and vendors alike. Whether, further addition to these new projects provides a cushion to its profitability will be an interesting thing to watch out for going forward.

L&T's share price was Rs 1455.4 at the time of writing, up by 1.67%.

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Jul 28, 2017 02:09 PM

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