India Markets Wednesday Wrap Up: Sustained Buying Fuels Indices

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Includes: EPI, IFN, IIF, INDY, INR, PIN, SCIF, SCIN, TTM
by: Equitymaster

Shrugging off a weak opening, Indian stock markets gained momentum thereafter led by buying activity across index heavyweights. Subsequent hours saw the indices inching upwards and this buoyancy was sustained in the final trading hour as well ensuring that the markets closed well above the dotted line. While the BSE-Sensex closed higher by around 434 points (up 2%), the NSE-Nifty closed higher by around 126 points (up 2%). The BSE Midcap and BSE Small cap also closed higher by 1% each. Gains were largely seen in FMCG, banking and auto stocks.

As regards global markets, Asian indices closed firm today while European indices have also opened on a strong note. The rupee was trading at Rs 44.45 to the dollar at the time of writing.

Auto stocks closed firm today and the key gainers were Hero Honda, M&M, Maruti and Tata Motors (NYSE:TTM). As per a leading business daily, auto major Tata Motors is looking to add fresh capacity for its small car Nano as it expects the Sanand plant in Gujarat to run at full capacity within a few months. At present, the company is producing 12,000 units a month and this is expected to reach full capacity at 20,000 units per month in the near term. This means that Tata Motors will have to consider fresh capacity to meet demand. The company has yet to decide whether this new capacity will be at the Sanand plant itself or at its Pantnagar plant where it used to produce Nano in limited quantities. Meanwhile, demand for the Nano appears to have gathered steam. The company expects an increase in the number of first time buyers purchasing the Nano.

That said, Tata Motors is likely to face pressure on the margin front as it is reluctant to hike the prices of Nano against a backdrop of rising input costs. Infact, besides high raw material costs, rising interest rates and fuel costs means that, overall, Tata Motors is not looking at any more price hikes to maintain its volumes growth.

As per a leading business daily, concerns of low gas supply has compelled Tata Chemicals to put on hold its plans of domestic expansion. While the company is ready with the engineering work, gas supply has been an issue and hence the decision to delay its expansion plans in the country. But overseas investments have not been dampened. And in this regard, Tata Chemicals will be investing US$ 170 m in phase II of its investment in Gabon. Earlier, the company had announced that it had acquired a 25.1% stake in the ammonia-urea fertiliser complex in Gabon for US$ 290 m (nearly Rs 13 bn). The complex is being set up through a joint venture with Olam and the Gabon Government at an investment of US$ 1.3 bn and it will have a production capacity of 1.3 million tonnes per annum (MTPA) in the beginning. As far as the funding is concerned, Tata Motors will raise US$ 82 m through preferential allotment of shares, US$ 68 m through sale of investments over next three years and the balance through debt funding of US$ 140 m all of which totals to US$ 290 m. The stock closed higher today.