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Telecom, auto stocks underperform
Tue, 9 Oct 01:30 pm

While the Indian equity markets shed a portion of their first half gains, they continued to trade in the positive territory with stocks from the healthcare, capital goods and FMCG spaces leading the pack of gainers. Stocks from the telecom and auto spaces were the top underperformers amongst the sectoral indices.

The Sensex today is trading higher by about 100 points (up 0.5%), while the NSE-Nifty is trading higher by about 30 points (0.5%). Stocks from the midcap and smallcap spaces are also trading firm with the BSE Mid Cap and BSE Small Cap indices up by about 0.5% each. The rupee is trading at 52.6 to the US dollar.

Power stocks are currently trading firm led by JSW Energy, KSK Energy and Power Trading Corporation of India. As per a leading financial daily, Tata Power has synchronized the third 800 MW unit of the flagship 4,000 MW Ultra Mega Power Project (UMPP) at Mundra. Two units of 800 MW each were synchronized by the company earlier during the year. Consequent to this, the company's total power generation capacity has risen to 6,899 MW out of which 6,047 MW is based on thermal energy whereas the balance is based on renewable energy sources such as wind, hydro and solar. According to the company, the Mundra UMPP will lead to an annual savings of 1.7 million tonnes of coal in power generation. The private utility provider has sought approval from Central Electricity Regulatory Commission (CERC) to raise tariff for electricity generated from the Mundra project in order to offset the higher cost of imported coal.

Auto stocks are currently trading weak with TVS Motors, Bajaj Auto and Ashok Leyland leading the pack of losers. Bajaj Auto is set to increase prices of the vehicles that it exports, following the reduction in duty drawback by the government recently. As reported by a leading business daily, the government recently reduced the export duty drawback rates - the rate which is a refund of duties paid on imported inputs for products that will be exported - on motorcycles, three-wheelers and medium and heavy commercial vehicles to 2% from 5.5% earlier. As per Mr Rajiv Bajaj, the Managing Director of Bajaj Auto, the company has no option but to raise prices, given the company's focus on protecting the profitability levels. While margins are not expected to be impacted, Mr. Bajaj is of the view that the Chinese competitors would be at a significant cost advantage.

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