Positive start to the day

Fri, 5 Dec 09:30 am

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The Indian stock markets began the day on marginally positive note. Other Asian stock markets were trading mixed with Hong Kong up by about 0.7% while China and Japan were down by about 0.6% and 0.1% respectively. On an overall basis, the sectoral indices in India were trading positive, with metals and capital goods stocks leading the pack of gainers.

The Sensex today is up by around 76 points (0.3%), while the NSE-Nifty is up by about 16 points (0.2%). The mid cap and small cap stocks have also opened in the green with BSE Mid Cap index and BSE Small Cap index up by 0.5% and 0.7% respectively. The rupee is currently trading at Rs 61.88 to the US dollar.

Auto stocks opened the day on a mixed note with Mahindra & Mahindra and Bajaj Auto leading the gainers while Tata Motors and Ashok Leyland were the least preferred. The stock of Mahindra and Mahindra has been under pressure of late. This has been largely due to a slowdown in tractor sale volumes coupled with a not so fast growing passenger vehicle segment, which has been impacted by narrowing gap in diesel and petrol prices, coupled with increased competition. As reported in the Mint, the general view is that the lack of new launches and a poor product portfolio is what has been impacting the company in recent times. With declining volumes in the month of November 2014 - after a flat September- the expectation is of further loss of market share in the coming months. As per the business daily, the company's market share in UV space fell to 35% in the quarter ended September 2014 from 46% in the quarter ended June 2014. As for tractor sales, the same fell by a third in the month of November 2014. The company's management has cited the fall on delayed paddy crop, low yield and low prices for sugarcane, cotton and paddy as the key reasons for the volume decline.

Indian banking stocks opened the day on a positive note with Bank of India, Canara Bank and Kotak Mahindra Bank leading the gains. While India's central bank has been maintaining a status quo on interest rates, it seems that banks are likely to cut interest rates in advance - i.e. before the central bank does - given the slowing credit off take. For instance, companies are looking at other cheaper sources of raising money, thereby leading the banks to take up such a move. As reported by the Economic Times, funds mobilized through commercial paper and external sources are lower by about 1.5% to 2% as compared to the banks' base rates. Banks such as HDFC Bank and ICICI Bank were reluctant to cut rates on the back of relatively high cost of borrowings. However, with them having reduced their deposit rates, it seems to be the first step towards cheaper credit.