Steel scrips may head up on likely export duty rollback

STOCK MARKET WATCH

It was agreed that these value-added products will be exported against proportionate import of hot-rolled coils under the advanced licensing scheme.

The Steel Ministry argued that the export duties on finished products will not be economical for the manufacturers. Meanwhile, inflation continues to be a concern even though the latest climb was not stoked by steel prices.

For the week ended Apr 19, the headline inflation rate rose to a 42-month high of 7.57 per cent as against 7.33 per cent a week ago.

Leading steelmakers, such as Sail, Tata Steel, JSW Steel, Essar Steel and Ispat Industries have promised to hold their prices for 2-3 months.

Steelmakers will take heart from the rebound in auto sales in April. The two-wheeler segment clocked 9 per cent higher sales during the month. Stability, or even a fall, in interest rates is likely to boost the demand in sectors that consume steel heavily.

IT: Could beat the market
Information technology shares are likely to perform marginally better than the broad market next week as a one-year extension in tax benefits and rupee depreciation have created a positive sentiment, analysts said.

Gains in the sector were not quantifiable as based on valuations, a 5 per cent rise was warranted. Yet, fears of concealed foreign exchange losses may trigger some profit booking.

The appreciation in share prices has not changed valuations. Infosys was trading at around 15 times two-year forward earnings and is still quoting at that level after a 6 per cent rise during the week.

Analysts are of the view that the support from tax extension and rupee depreciation will be short-lived as US economic sentiment is more likely to govern the fate of domestic IT shares. The Indian rupee depreciated 1.2 per cent against the dollar this week. However, experts said this trend was short-lived.

Banks: Likely to look up on RBI policy clarity
Bank stocks are expected to go up next week as uncertainty on Reserve Bank of India monetary policy steps is over. RBI at its annual monetary policy on Tuesday hiked the CRR by 25 basis points to 8.25 per cent. Earlier, on Aprl 17, the central bank had announced 50 bps hike in two stages.

None of the banks have hiked their prime lending rates despite CRR hike and since the banks are not likely to do so, their credit growth will not suffer, said an analyst with a Mumbai-based brokerage.

RBI has projected a 20 per cent credit growth in 2008-09 compared with 22 per cent registered by banks in 2007-08.

However, some analysts fear the central bank may go for further tightening in view of the high inflation.

Auto Stocks: Up on better April sales
Frontline automobile stocks are seen up next week on better sales performance in April.

The country's biggest motorcycle company Hero Honda Motors reported a 9 per cent year-on-year sales growth for April.

Analysts said the growth has been due to a reduction in the excise duty to 12 per cent, price hikes and reduced auto loan rates.

India's largest car maker by volume Maruti Suzuki India reported a 24 per cent rise in sales in April, while Mahindra & Mahindra's total vehicle sales, excluding tractors, rose 56 per cent during the month.

But despite good sales last month, margins are still under pressure due to the high raw material prices, another analyst said. The prices of raw materials including steel, nickel, copper have risen by almost 20-30 per cent in April.