Reliance lends a helping hand

Tue, 13 Jul Closing

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After languishing in the red for most part of the day, indices shot into the positive during the closing hours and managed to remain there right till the end. Sensex closed with gains of nearly 50 points (up 0.2%) whereas Nifty edged higher by around 18 points (up 0.3%). Strong gains were also seen amongst BSE Midcap and Small cap indices as both of them gained close to 1% each. On the Sensex, one stock gained for every one that declined.

While Asian stocks closed mixed today, Europe has opened on an encouraging note. The rupee was poised at Rs 46.8 to the dollar at the time of writing.

The strength in Indian indices was not a part of any secular trend amongst Asian markets today. This indicated that the gains were more India specific than anything Asian or may be, even global. Infact, had it not been for the surge in Reliance Industries mid way through the session, the indices could have well closed the day in the red. Reliance edged higher by nearly 2% today amidst news that the company is looking at yet another acquisition in the shale gas space and that the latest acquisition would be much bigger in size than the previous two. We do not know for sure whether there is any truth involved in the story but it did help the Sensex close in the positive today for the second day in a row in the current week.

TVS Motor, India's third largest two-wheeler company is looking at buying the assets of LML India, an erstwhile leading manufacturer of scooters in India. As per reports, LML India is a loss making company presently as it does not sell anything and its assets are lying mostly idle. It should be noted that the company shut down its operations around 3-4 years ago as it was suffering huge losses. Given this state of affairs, there is a strong possibility that the assets would be offloaded at a throwaway price to interested parties. The scooter making facility of LML would be an excellent fit for TVS as the company looks to expand its market share in the segment on the back of its new launch TVS Wego. The management of TVS has however refused to comment on the story.

Real estate stocks continued with their strong run with firms like DLF, Unitech and HDIL ending strongly in the positive. After being at the receiving end of investors' fury for quite some time now, interest in sector stocks has been revived. This is not only on account of an improved risk return scenario as per some experts, recent policy announcements with respect to the sector have also been quite positive. The case in point being the recent development whereby the Government is planning to make it easier for real estate developers to raise money from overseas. As per a leading channel, the move is aimed to give fresh incentives to attract FDI in real estate which is expected to revive projects that have not taken off due to lack of funds. while this is indeed a welcome step, we don't believe that real estate stocks are genuine wealth creators over the long term and hence, extreme care should be taken while choosing to invest in any of the sector stocks.