'Realty' bites as markets crash

Tue, 2 Feb Closing

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In what can be termed as a turnaround of sorts, though in the negative sense, the Indian markets fell deep into the negative after trading with strong gains during the first half of today's session. Selling was rampant across stocks from the banking and realty spaces, possibly on the back of fears of a rise in broader interest rates within the country. Indian markets were in fact the worst performer in Asia today, where gains were seen in Japan (up 1.6%) and Hong Kong (up 0.1%).

The BSE Sensex and NSE Nifty closed with losses of around 190 points (1.2%) and 75 points (1.5%) respectively. Mid and small cap stocks followed suit. The BSE Midcap and BSE Smallcap indices closed lower by 1.2% and 0.8% respectively. Rupee was trading at 46.3 against the US dollar at the time of writing.

Power sector stocks closed weak today. Key losers here included PTC, Neyveli Lignite, and NTPC. NTPC was in fact also amongst the biggest loser on the Sensex. This may well be attributed to the discount at which the government is offering the stock through a follow-on public offer (FPO) that opens tomorrow. As against its earlier plans of raising around Rs 110 bn through divesting a 5% stake in the company, the government now hopes to collect less than Rs 90 bn. And that probably hurt sentiment towards the stock today.

Capital goods stocks also closed weak today. Some major losers here included Praj, Suzlon, Thermax, and Punj Lloyd. Heavyweights like BHEL, L&T, and Siemens also closed weak. As per a report appearing on the Wall Street Journal, Siemens India's global parent - Siemens AG - is planning to ramp up the former's presence in the country. The focus will be green energy and manufacture of a range of other engineering products for sale in the domestic as well as export markets. Siemens AG's chief has in fact talked of investing Rs 16 bn over the next three years and significantly raise Siemens India's head count to meet its growth objectives in the country.

Given the kind of opportunities for engineering companies that India presents, this move from Siemens is not surprising. With investment opening up in sectors like power plants, telecom networks, roads, ports and highways, most global engineering firms are trying to establish a greater presence in the country. However, these firms face thinning margins given the intensity of competition. Apart from that, timely execution also remains a key problem.

Energy stocks closed mixed. While gains were seen in Gujarat Gas and HPCL, selling marked trading in GAIL and BPCL. Oil & gas exploration major, ONGC, which announced a huge capex plan today, closed in the positive. The company is looking to spend around Rs 260 bn during the next financial year (FY11) to shore up its oil & gas presence. This is higher than the earlier plan that ONGC had of spending Rs 240 bn for expansion, exploration and modernization.