Banks, realty stocks lead the fall

Wed, 8 Dec 09:30 am

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Asian markets have opened today on a mixed note. While China and Hong Kong are down 0.5% and 0.8% respectively, Japan is up 0.7%. As for the Indian markets, these have opened in the negative. Banking and realty stocks are leading the losses currently. FMCG stocks are however trading with gains.

The BSE-Sensex is trading lower by around 100 points (0.5%), while the NSE-Nifty is down about 35 points (0.6%). Mid and small cap stocks are also trading weak, with the BSE-Midcap and BSE-Smallcap indices down by 0.4% and 0.6% respectively. The rupee is trading at 44.94 to the US dollar.

Stocks of oil marketing companies (OMCs) are trading strong currently, led by HPCL, IOC, and BPCL. As per a leading business daily, these OMCs are planning to raise petrol and diesel prices by Rs 2 a litre each in a few days from now. This comes in the wake of their rising losses owing to higher input costs (crude oil). As a matter of fact, crude prices have topped the US$ 90 a barrel mark, thus burning a hole in these companies' pockets. Petrol prices have already risen four times since these were deregulated in June 2010, all thanks to the consistent rise in crude oil prices. As reported, the OMCs are losing Rs 4.7 per litre on diesel and thus Rs 2 hike will help them reduce some of their losses on selling this fuel. While these plans bring cheers to the OMCs, we fear their impact on inflation, which despite falling to 8.5%, remains at historically high levels and above the RBI's target of 5.5%. And expectations of a rise in inflation due to higher fuel prices can then lead the RBI to raise interest rates that will in turn be detrimental to companies that are looking to raise capital for expansion and growth.

Software stocks have opened mixed. While gains are seen in Wipro and Tech Mahindra, selling pressure marks trading in Infosys and HCL Tech. A leading business daily has quoted TCS' management as saying that the Indian IT sector is now back in a good shape. In fact, the Vice-Chairman of the company Mr. S. Ramadorai expects the sector to post strong growth in the short to medium term. This is notwithstanding the concerns that still mark business from the European region, which is IT companies' second largest market after the US. TCS, along with Infosys and Wipro are in fact eyeing US$ 27 bn of global IT services deals that are company up for renewal. The company is also very optimistic on the Chinese market, where it is looking to strengthen its presence through partnerships. The company already has five development centres in China and is looking to expand further.