Indian Markets Friday Wrap-Up: Realty, Power Stimulate Markets

The indices opened on a firm note today, but quickly slipped into the red. Thereafter, alternate bouts of buying and selling continued till the end of the day, with the indices managing to close in the green despite a sell off towards the end. The Sensex closed higher by around 55 points, while the Nifty closed higher by 20 points. Stocks from the mid-cap and small-cap indices also ended in positive territory. Stocks from the consumer durables, realty and banking space led the pack of gainers, while stocks from the IT and auto space led the pack of losers. Rupee closed at 48.92 against the US dollar. The Asian markets closed in the green today. The European indices are currently trading firm.

Energy stocks ended mixed with Petronet LNG and Indraprastha Gas leading the pack of gainers, while Reliance Petroleum and GAIL ended weak. As per a leading business daily, ONGC’s overseas arm OVL is planning to bid for certain exploration blocks in Iraq. It should be noted that OVL is the only Indian company that has been qualified by the Iraqi government and has time till May 2009 to submit its bid. It may be noted that oil prices have tumbled by over 70% since Iraq had announced the first round of auctions. We believe ONGC will be cautious in bidding for the blocks, considering that its acquisition of Imperial Energy turned out to be an expensive commitment in hindsight.

Media stocks closed firm led by ENIL and TV18. As per a leading business daily, DTH (direct-to-home) players have proposed to the ministry of Information & Broadcasting for moving the license fee reduction bill to the cabinet. As per the proposal, the players have asked the ministry to reduce the fee from the current 10% to 6%. It is believed that the industry is expected to record losses of nearly Rs 40 bn next year, up from Rs 20 bn. It may be noted that in June 2008, the ministry had asked the Telecom Regulatory Authority of India (TRAI) for its recommendations on the proposed license fee, but nothing has happened on that front yet. As such, this move by the DTH players is likely to meet a similar fate.

The global slowdown has impacted India’s exports for the second consecutive month. Demand from developed markets like US and Europe has deteriorated significantly. As per the latest figures, India’s exports have fallen by almost 10% to US$ 11.5 bn for the month of November 2008, as compared to US$ 12.8 bn in November 2007. However, if we calculate the same in rupee terms, exports have expanded by 12%, which could be attributed to the 26% depreciation of the Indian rupee against the US dollar.

In the meanwhile, the finance ministry has asked the telecom department to double the floor price for 3G (third generation) and wireless broadband spectrum. It is believed that the bids for a pan India 3G spectrum will be increased to Rs 40 bn from the previous price of Rs 20 bn. This request is likely to further delay the auction process.