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Banks, energy stocks top losers
Mon, 7 Oct 11:30 am

After a weak start, the Indian stock markets continued to languish in the red in the last two hours of trade. Banking and oil and gas indices witnessed the highest selling pressure.

The BSE-Sensex is down 204 points and the NSE-Nifty is trading down 63 points. However, the BSE Mid Cap index is trading up by 0.18% and the BSE Small Cap Cap index is trading up 0.3% The Rupee is trading at 61.8 to the US Dollar.

Auto Ancillaries stocks are trading mixed today. UCAL Fuel Systems and Asahi India are leading the gainers; while Exide Industries and NRB Bearings are leading the losers. Bharat Forge is trading 1.3% lower today. Bharat forge plans to increase the share of its non-automotive business by diversifying aggressively into power, oil and gas, and railways. It plans to derive 60% of its revenue from these non-automotive businesses. Currently, non-automotive business contributes 40% ot the company's total revenues. According to the management, Bharat Forge's first priority is to expand its railway business by cashing on the growing opportunities in locomotive components. For this purpose, the company is already in talks with all major foreign players in the railway sector for a future partnership. The company has recently bagged its first railway order of crankshafts for locomotives. Bharat Forge aims to bag orders worth at least US$ 100 m from the Indian railways. Also, the near term outlook for the auto sector does not look very promising as many OEMs are planning to take production cuts in order to align with the sluggish demand environment. Therefore, the company is banking on its exports and non-automotive business.

Most IT stocks are trading higher today. Tech Mahindra and HCL tech are among the top gainers. According to a leading business daily, Indian software companies are poised to gain more outsourcing contracts from the US than ever before. This is due to the fact that several regional banks in the US are looking to cut costs and become more efficient with their technology budgets. This is a welcome news for large IT companies such as Infosys, Tata Consultancy Services (TCS) and Wipro as the US is by far their biggest market. Over the last few years large sized contracts from US companies have been hard to come by.

The top 20 regional banks in the US including SunTrust Bank, PNC and Key Bank, currently spend US $1-1.5 bn on information technology every year, of which only 20-25% is outsourced to offshore services providers. This is likely to rise to 75% over the next few quarters as they adopt newer technologies to cut costs, integrate their banking systems and catch up with their larger rivals. These smaller banks will initially focus on deploying emerging technologies, such as analytics, cloud computing and mobility, into their existing systems but they may also expect Indian software firms to provide additional services like infrastructure management through outsourcing. They are looking for a 'one stop shop' solution where they can get infrastructure, software, applications and BPO all from the same vendor, provided that the vendor has proven and deep domain expertise. According to industry body NASSCOM Indian software firms get up to 40% of their revenues from the banking, financial services and insurance (BFSI) vertical. Growth in this key vertical has been a cause for concern for many Indian IT firms recently due to the uncertain growth prospects of the US economy.

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