Banks, energy drag the markets down

Wednesday 20th May, 2009
Indian markets continued their downward trend during the final hour of trade as profit booking amongst the index heavyweights led the BSE-Sensex to end the day with losses of around 240 points. The NSE-Nifty closed lower by about 50 points. However, stocks from the mid-cap and small-cap space ended higher by 6.3% and 9.1% respectively. Buying activity was witnessed in stocks from the metals and auto sectors, while stocks from the banking and energy spaces ended the day on a weak note.

Other Asian markets ended the day on a mixed note. The European indices are currently trading in the green. Rupee was trading at 47.6 against the US dollar at the time of writing.

Capital goods stocks ended the day on a firm note led by Praj Industries, Punj Lloyd and Areva T&D. Crompton Greaves announced its FY09 results today. The company recorded a topline growth of about 28% YoY, while its operating profits grew by 33% YoY. The company witnessed an operating margin expansion of 0.5% YoY (to 11.5%), mainly on account of lower cost of traded goods (as a percentage of sales). Raw material cost, on the other hand, increased by 0.3% YoY (as a percentage of sales). Profits for the year grew by 38% YoY. Apart from a good performance at the operating level, lower depreciation and interest costs helped the company accounted for the growth in earnings.

Steel stocks ended the day on a firm note led by Tata Steel, JSW Steel and SAIL. Tata steel ended the day on a strong note on the back of news that it has secured loans to the tune of Rs 20 bn from the Life Insurance Corporation of India (LIC). As such, LIC will subscribe to a portion of Tata Steel’s non-convertible debentures (NCDs). It is believed that the issue carries an interest rate of 10.5% per annum. It may be noted that Tata Steel has plans to raise a total of Rs 30 bn through the issue of NCDs. The company plans to utilise a portion of the proceeds to prepay its debt obligation and the balance will be retained to enhance the capital base of its UK subsidiary.
The Centre for Monitoring Indian Economy (CMIE) expects the WPI inflation rate to remain at 0.1% during FY10. Inflation for FY09 stood at about 8.3%. CMIE has predicted that the price of fuel products and manufactured goods are set to fall during the year, while those of primary articles will remain higher. In addition, it has projected that a lower money supply growth and an increase in capacity expansions during FY10 will keep inflation at a lower level.