India Markets Friday Wrap-Up: Rate Cut Hopes Cheer Markets

by: Equitymaster

The Indian stock markets started of the day on a positive note in anticipation of a favourable monetary policy from the Reserve Bank of India (RBI) on Monday. Positive news from Europe and the upcoming Greek elections also added to the buoyancy. The indices opened well above the dotted line and were trading well in the positive for the entire session of trade. In the final hour of trade markets surged and ultimately closed near the daily high. While the BSE-Sensex closed higher by around 272 points (up 1.6%), the NSE-Nifty closed higher by around 84 points (up 1.7%). The smaller indices had a relatively poorer day on the bourses.

The BSE Mid Cap index and the BSE Small Cap closed 0.6% and 0.5% higher respectively. All sectoral indices closed the day in the positive. Auto stocks saw strong gains on the back of Tata Motor's (NYSE:TTM) robust global vehicle sales for the month of May, thanks to a strong performance from its subsidiary Jaguar Land Rover. Banking stocks and realty also saw strong gains in anticipation of a rate cut from the central bank early next week.

As regards global markets, most Asian indices had a positive outing today on strong global cues. European indices also opened the day in the green. The rupee was trading at Rs 55.68 to the dollar at the time of writing.

Ultratech Cement (OTC:UCLQF) part of the Aditya Birla Group (OTC:ABWAF) and France's Lafarge (OTCPK:LFRGY) are separate in talks to buy Jaiprakash Associates' cement units in two states. This deal is potentially worth up to about US$ 1.6 bn, according to a leading business daily. Preliminary talks have been concluded and final bids are expected shortly. Jaiprakash had earlier has spun off its cement units in Gujarat and Andhra Pradesh into a separate company, Jaypee Cement, which has a combined capacity of 9.8 million tonnes. The business could be worth about Rs 90 bn, based on an estimated cost of US$ 160 a tonne for a greenfield plant. Swiss cement maker Holcim, which has stakes in two large Indian cement companies ACC Ltd and Ambuja Cements is also believed to be in the race.

The country's largest private power producer, Tata Power has plans to build more projects based on imported coal. However, this is subject to the government formulating the proper policy framework for sourcing coal from overseas mines. The company is still looking for clarity on imported coal from the government. It has recently commissioned a 4,000 mega-watt ultra mega power project at Mundra. The coal for this project is currently being sourced from Indonesia. However, Indonesia had decided in September 2011 to adjust its pricing policy to bring the prices of its coal at par with international prices. This move made sourcing coal from Indonesia an expensive proposition. The company has another project at Dherand which is also based on imported coal.