Updated: Thu, 21 Jun 2012 19:00:00 GMT

Indian share markets extend losses

Indian share markets extend losses.BSE Sensex is down 56 points. IT, banking and metal stocks are the biggest losers.


Selling pressure intensified in the Indian share markets with the indices falling further below the dotted line in the last two trading hours. Most of the sectoral indices are trading negative with IT, banking and metal stocks being the biggest losers. Power and consumer durable stocks are trading flat.

The BSE-Sensex is trading down 56 points and NSE-Nifty is trading down 15 points. BSE Mid Cap index and BSE Small Cap index are trading down by 0.2% and 0.3% respectively. The rupee is trading at 55.9 to the US dollar.

Majority of the automobile stocks are currently trading in red with Mahindra & Mahindra (M&M) and Maruti Suzuki being the biggest losers. Hero Motocorp and Bajaj Holdings are the few gainers. As per a leading financial daily, M&M wants to increase its share in the scooter market to 8-10% from the current 7-8%. The company had entered the two-wheeler market in 2009 and has lined up five launches in 2012.  While Duro DZ scooter and Rodeo RZ scooter have been launched recently, three motorcycles including Mahindra Mojo will be launched later in the year. M&M does not want to restrict launches to specific CC segmentation but will focus on consumer needs.  The company has said that its 1 m units manufacturing capacity at Indore is sufficient to fuel its growth expansion. M&M, which already has experience in the electric car space through its launch Reva, is contemplating entering the electric scooter space. But the company feels that this segment is fraught with challenges such as battery technology and cost of battery.

Majority of the engineering stocks are trading positive with Everest Kanto and LakshmiMachine being the biggest gainers. As per a business daily, power generation equipment for projects above 1,000 MW may attract import duty at the rate of 19%. If the proposal is approved, it will give domestic equipment manufacturers such as BHEL, L&T and ABB a major boost. At present, power generation equipment for projects below 1,000 MW bears a duty of 5% while there is almost nil duty on equipment for projects above 1,000 MW. Domestic equipment manufacturers allege that there is no level playing field. Foreign machines are cheaper by up to 14%. This is hurting the local players' investment and capacity expansion plans. In the absence of the import duty, it is believed that domestic power equipment manufacturers like BHEL may find some of their capacity lying idle during the Twelfth Plan period. However, power producers fear that this may lead to stiff rise in tariffs. While the requirement for power is high, margins are thin. Hence, any price increase will have to be borne by the end-user. The stocks of L&T, ABB and BHEL are trading higher on the bourses by nearly 2%.

By Equitymaster – India's leading 'independent' equity research initiative. Trusted by over a million members all over the world, Equitymaster, with its well-researched, unbiased and honest opinions is the preferred destination for investors interested in long term investments.

Copyright © Equitymaster Agora Research Private Limited

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