The Indian markets opened way below the breakeven mark, and have not shown any signs of a move northwards since then as markets around the world were shaken on Dubaiís request to suspend debt repayments. Asia is currently trading in the red with Hong Kong (down 3.4%) leading the pack of losers. The US markets remained closed yesterday.
Currently, in India, heavyweights from the BSE-Sensex are trading in the red with hardly any sector being spared in the broad based sell off. The BSE-Sensex is trading lower by 367 points, while the NSE-Nifty is down by 128 points. Selling interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 2.9% each. The rupee is trading at 46.83 to the US dollar.
Steel stocks have opened the day on a negative note. Losers here include Jindal Steel and Tata Steel. Tata Steel announced its 2QFY10 consolidated results yesterday. The company reported a topline decline of 43% YoY as both volumes and realisations plummeted on the back of poor demand in the developed markets. Operating margins fell to 1.5% in 2QFY10, down from 18.6% in 2QFY09 as fixed costs did not decline in line with sales. Other income also declined by 76% YoY during the quarter. As a result, the bottomline remained negative for the second consecutive quarter. However, the company expects better performance during the second half of the year as demand improves and input costs moderate. Tata Steel plans to reduce its debt by US$ 2 bn over the next year from the current US$ 12.9 bn.
Energy stocks have also opened the day on a negative note. Losers here include Reliance and ONGC. As per a leading business daily, ONGCís overseas arm OVL is eyeing a 20% to 25% stake in a gas field in Iran. The rights to the gigantic South Pars gas field is held by Petropars, a unit of the state owned National Iranian Oil Company (NIOC). OVL is likely to present its case when top officials of NIOC visit India next week. It may be noted the government of India has mandated energy majors to aggressively acquire oil and gas assets overseas. It has also put its diplomatic weight behind such effort in the recent past. However, in our view, such assets have considerable political risk attached to them. For example, OVL has not yet received the approval to develop the offshore Farsi gas field in Iran that it had found two years ago. Also, the gas pipeline from to India via Pakistan never really took off.