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Auto stocks push markets lower
Mon, 18 Oct 09:30 am

The Indian markets have started today's session on a negative note. The benchmark indices opened above the breakeven mark but soon slipped into the negative territory. Other key Asian markets are in the red with Taiwan (down 1.3%) leading the pack of losers. The US markets ended lower by 0.3% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading weak with auto majors facing the brunt of selling activity. The BSE-Sensex is trading lower by around 48 points, while the NSE-Nifty is trading down by around 21 points. However, buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.1% and 0.3% respectively. The rupee is trading at 44.24 to the US dollar.

Energy stocks have opened the day on a weak note. Losers here include GAIL and ONGC. As per a leading business daily, ONGC will invest Rs 88 bn for the redevelopment of the southern part of its Mumbai High fields. It has already started deploying a cost-effective technology to maintain output from the fields. The company's premier asset, the Mumbai High field, remains a challenge since its discovery in 1974. Since then, the field hit a peak of 400,000 barrels per day (bpd) before falling to current levels of 210,000 bpd, causing concerns. The latest investment will lead to an additional gain of 18.3 m tonnes of oil and 2.7 bn cubic meters of gas. It involves drilling of 75 new wells and intervention in existing wells. It may be noted that ONGC routinely incurs capex to enhance the production profile of its ageing fields at a time when new large discoveries have been difficult to come by.

Fianancial stocks have opened the day on a weak note. Losers here include REC and Power Finance Corporation. As per a leading business daily, REC plans to raise funds by issuing deep discount bonds in the current financial year. The zero coupon bonds are likely to be issued in the last quarter of FY11. Their face value will be Rs 30 to 40 bn, while the redemption value will be about Rs 75 bn. Earlier this year, the government had approved its plan for issue of 2.5 m deep discount bonds with maturity value of Rs 30,000 each for a 10-year period, by the end of this fiscal. It may be noted that it will also raise another Rs 10 to 15 bn through infrastructure bonds in FY11. The company has received the status of infrastructure finance company from the Reserve Bank of India last month.

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