Optimism Drives India Stocks Higher

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
13 May, 2010
New York City

Stocks in Mumbai closed higher on the prospect of improving economic growth and earnings. Nitesh Estates closes below its initial public offer price. Sara Lee agrees to sell its 51% stake in the Godrej Sara Lee Ltd. Thermax indicated better outlook in the current fiscal year.

[R]6:00 PM Mumbai, 8:30 AM New York – Stocks in Mumbai closed higher on the prospect of improving economic growth and earnings. Nitesh Estates closes below its initial public offer price. Sara Lee agrees to sell its 51% stake in the Godrej Sara Lee Ltd. Thermax indicated better outlook in the current fiscal year.[/R]

The Sensex index gained for the second day, led by Mahindra & Mahindra and Reliance Infra on the optimism of economic expansion and continued investment in infrastructure development.

For India’s economy to grow at 10% we need to spend Rs 450,000 crore on infrastructure like roads, ports and power in the next five years, said Prime Minister in March. The economy is expected to grow at 8.5% in the year current fiscal year after it expanded at 7.2% in the previous year, Finance Minister Pranab Mukherjee said on April 28.

The wholesale price index in India increased 2.9% to 299.5 from 291.2 for the previous week. For the year ending in the week average inflation surged to 16.76% compared to 6.39% in the same period a year ago according to the latest data from the statistics bureau.

Coal India Ltd, planning the nation’s largest initial public offering and expects to save about Rs 2500 crore in employee costs over the next 10 years on attrition and mechanization, said Partha Bhattacharya, Chairman of the Kolkata-based coal miner. The news was first reported by Bloomberg.

The company is still awaiting its IPO approval from the Cabinet, Bhattacharya said.

Magma Fincorp Ltd, a non-banking finance company raised Rs 122 crores through the sale of 4.07 million shares at Rs 301 each to large investors, said Sanjay Chamria, Vice Chairman and Managing Director of the company. Over 90% of the subscription to the issue came from overseas investors.

‘Among the components of capital inflows, India preferred long-term flows to short-term flows and non-debt flows to debt flows. The logic is that our policy has been quite liberal in sharp contrast to other emerging market economies which reversed the liberalization when inflows became volatile’, said RBI Governor at a conference organized by the Swiss National Bank and IMF in Zurich on Tuesday.

The Sensex index in India increased 70.06 or 0.41% to 17,265.87 and CNX Nifty index rose 27.40 or 0.53% to 5,184.05. Among the Sensex 30 stocks, 25 rose and 5 fell.

On BSE trading, 1,826 stocks advanced, 952 declined and 105 were unchanged. Interest rate sensitive real estate developers and auto stocks gained. Bharti Airtel, Tata Steel reverse initial gains.

Nitesh Estates closed at Rs 53.20 a 1.48% discount to the initial public offer price of Rs 54.

Rupee edged higher 11 paisa to Rs 45.00 against one dollar.

Gainers & Losers

Borosil Glass Works Ltd increased 5.0% to Rs 662.60 after the company is expected to receive a large sum from sale of an industrial plot in the Western suburb of Mumbai.

Elecon Engineering Company Limited added 4.8% to Rs 81.90 after the company said today it has secured orders for Rs 208.50 crore from various vendors, including GMR Infrastructure and Steel Authority of India Ltd, for construction-related works.

Godrej Consumer Products Limited gained 9.1% to Rs 325.30 after Sara Lee Corp. announced today it has agreed to sell its 51% stake in the Godrej Sara Lee Ltd. joint venture to Godrej Consumer Products Ltd. for €185 million.

The Great Eastern Shipping Company Ltd gained 5.1% to Rs 313.90 after the company said its unit filed a prospectus with the Securities & Exchange Board of India, according to a statement on the Bombay Stock Exchange today.

Kotak Mahindra Bank Limited rose 1.0% to Rs 776.45 after the bank started talks with Citibank NA''s Indian management for a possible acquisition of CitiFinancial Consumer Finance India Ltd.

Mangalore Refinery and Petrochemicals Limited fell 1.4% to Rs 73.35 after the refinery said fourth quarter sales rose 33% to Rs 8,700 crore from Rs 6,535 crore a year ago. Net profit for the quarter fell 58% to Rs 253 crore compared to net profit of Rs 608 crore a year ago.

Srinivasa Hatcheries Limited rose 5.0% to Rs 167.00 after the company fixed May 22 as the record date for a liberal 1 to 1 bonus issue.

Strides Arcolab Limited rose 3.2% to Rs 342.45 after the company announced US regulatory approval of Vecuronium Bromide for injection.

Tata Motors Limited increased 4.0% to Rs 831.70 tracking gains in its stock in New York.

Thermax Limited rose 0.8% to Rs 671.00 after the solution provider in energy and environment engineering said fourth quarter sales rose 26.7% to Rs 1,171 crore from Rs 924 crore a year ago. Net loss for the quarter was Rs 15.7 crore compared to net profit of Rs 94.3 crore a year ago.

Welspun India Limited gained 3.5% to Rs 91.10 after the textiles maker said fourth quarter sales rose 42% to Rs 458 crore from Rs 323 crore a year ago. Net profit for the quarter fell 25% to Rs 19.3 crore compared to net profit of Rs 26 crore a year ago.