The Indian markets have started on a positive note. The benchmark indices opened above the breakeven mark and have managed to stay put in the positive territory since then. Asia is currently trading in the green with Japan (up 1.4%) leading the pack of gainers. The US markets closed higher by 0.8% yesterday.
Currently, in India, heavyweights from the BSE-Sensex are trading in the green with metal and auto stocks leading the pack of gainers. The BSE-Sensex is trading higher by 80 points, while the NSE-Nifty is up by 26 points. Buying interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.9% and 1.1% respectively. The rupee is trading at 46.78 to the US dollar.
Energy stocks have opened the day on a positive note. Gainers here include Indraprastha Gas and GAIL. As per a leading business daily, the oil ministry has requested the Prime Minister to immediately issue oil bonds to the tune of Rs 209 bn to public sector oil marketing companies - Indian Oil, BPCL and HPCL- to compensate for their under recoveries on the sale of petroleum products. It may be noted that no oil bonds have been issued in the last three quarters even though the three firms currently lose Rs 3.5 per litre on petrol, Rs 2.4 per litre on diesel, Rs 18.1 per litre on kerosene and Rs 250.7 per LPG cylinder. In fact, they are projected to lose Rs 450 bn in revenues during FY10. This sorry state of affairs stems from the fact that fuel prices in India are kept artificially low due to socio political reasons. In our view, as long as this root cause remains, someone has to bear the brunt. The candidates by default are the oil marketing companies.
Auto socks have opened the day on a positive note. Gainers here include TVS Motor and M&M. As per a leading business daily, M&M has formed a joint venture (JV) with a Chinese tractor firm Yueda Group. Yueda Group is China’s second largest tractor producer. The JV, Mahindra Yueda (Yancheng) Tractor Company, will invest about Rs 1.8 bn into a plant which is expected to start production in 12 to 15 months. The plant will have a capacity to produce more than 50,000 tractors per year. It may be noted that this is the second JV formed by M&M in China. Its earlier JV, Mahindra China Tractor Company, was formed with Jianling Motors Company in 2005. In our view, this is another instance of Indian auto companies becoming increasingly confident at the world stage backed by a strong sales in India and greater belief in their own technical capabilities.