Monday, August 3, 2009

Closing Bell 21 July 2009

losing Bell 21 July 2009

The Indian indices languished below the dotted line throughout today's trading session on account of sustained selling activity witnessed among the index heavyweights. The BSE-Sensex ended the day lower by around 125 points, while the NSE-Nifty closed lower by 33 points. Stocks from the mid-cap index also ended in the negative territory, down by 0.19%. However, stocks from the small-cap index closed in the positive, up by 0.24%. Stocks from the software and power sectors led the pack of losers on the bourses today. While selling pressure was witnessed across sectors, select stocks from the metals and auto sector garnered investors' interest. The overall market breadth was negative with losers outnumbering gainers by a ratio of 1.3 to 1 on the NSE.

While Asian markets closed mixed, the European indices are currently trading firm. The Rupee was trading at 48.41 against the US dollar at the time of writing.

As per a leading business daily, Suzlon Energy has raised US$ 201.9 m (about Rs 10 bn) by issuing securities in the global markets, of which US$ 804 m has been issued through Global Depository Receipts (GDRs) and the remaining US$ 93.9 m through Foreign Currency Convertible Bonds (FCCBs). The company has issued 14.6 m GDRs at US$ 7.4 per unit. According to the terms of the issue, each GDR would entitle the holder to get it converted into four equity shares. The company's debt to equity ratio at the end of FY09 was as high as 1.7. Prior to this GDR issue, Suzlon was looking at a number of options to raise funds to lower this high debt and selling a part of its stake in its Belgian subsidiary Hansen Transmissions was one such option. Having raised funds through the GDRs and FCCBs issued, the company is likely to use these resources to lower its debt burden going forward. The stock closed in the red.

Yes Bank announced its 1QFY10 results some time back. The bank's interest income recorded a growth of 31% YoY during the quarter, on the back of 25.5% YoY growth in the advances. The higher growth in interest income is led by an increase in income from the treasury and corporate banking segments, which grew by 57% YoY and 21% YoY respectively. The non-fund based income more than doubled during the quarter. The cost of debt declined on account of deposit mobilisation through the SME (Small and Medium Entrepreneurs) and retail clients. Despite the higher provisions, which increased more than five times, the net income recorded a growth of 84% YoY during the quarter. The net non-performing assets increased to 0.24% of total advances from 0.17% in the same quarter last year. The bank's capital adequacy ratio remained strong at 17.63% during the end of 1QFY10. The stock ended the day on a flat note.

As per the ministry, the cement output in the current fiscal is expected to grow by around 13% to 212.4 MT. The production of cement by FY11 and FY12 is expected to rise to 23.16 MT and 262.61 MT respectively. The higher demand for the commodity has prompted cement firms to keep raising their output. In 1QFY10 cement consumption increased by 11% YoY. The same is on account of delayed monsoon and upcoming infrastructure projects coupled with stimulus packages announced by the government which supported rural housing demand. The demand growth is expected to sustain as government spending on infrastructure projects, as outlined in the Budget, gathers further momentum. The sector is expected to witness an addition of 60 to 70 MT of capacity over the next two to three years. While this is a positive from a long term standpoint, in the medium term additional capacities are likely to exert downward pressure on cement prices.

Though still in the red, markets shed some of their early losses during the previous two hours of trade. Currently, stocks from the software, energy and engineering sectors are leading the pack of losers, while select stocks from the metal, auto and telecom sectors are trading firm. The overall decline to advance ratio is poised at 1.2 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty are trading weak, down by approximately 45 points and 15 points respectively. However, the BSE-Midcap and the BSE-Smallcap indices are trading higher, up by approximately 0.2% and 0.3% respectively. The Rupee is trading at 48.27 to the US dollar.

Steel stocks are trading higher currently, led by Tata Steel, JSW Steel and SAIL. As per a leading business daily, Tata Steel plans to raise around US$ 500 m through issue of global depository receipts (GDR) priced at US$ 7.6 each. The company will issue around 65 m GDRs, each GDR representing one share. It may be noted that Tata Steel plans to raise the capacity of its Jamshedpur plant from 6.8 m tonnes currently to 10 m tonnes by FY11 at an estimated investment of Rs 120 bn (approximately US$ 2.5 bn). It is also developing its overseas mining project at Mozambique which is likely to be operational by 2010. As per the management, the company is likely to use these funds in overseas mining projects and long term investment plans. However, any details on the nature of the projects have not been disclosed. Tata Steel's consolidated debt currently stands at around US$ 9.8 bn while the cash and cash equivalents are around US$ 2.1.

Software stocks are trading mixed currently. While TCS and Mindtree are trading lower, Wipro and Tech Mahindra are trading higher. Mindtree announced its 1QFY10 results late last evening. The company's topline has declined by 10% QoQ mainly on account of decrease in volumes due to reduced IT spending from existing clients, particularly in the manufacturing and R&D segments. Sales were also impacted on account of pressure on billing rates, as the same declined by 0.5% QoQ. Operating margins slumped by 9% QoQ to 16.6%, led by lower utilisation and increase in software development costs. Subsequently, the company's net profits declined by 17% QoQ.

The Indian markets remained weak during the previous two hours of trade on the back of sustained selling activity among the index heavyweights. Currently, selling activity is being led by stocks from the IT, power and realty sectors, while select metal and engineering stocks are trading firm. The overall market breadth is flat, with the total number of gainers almost equal to the losers on the BSE.

The BSE-Sensex and NSE-Nifty are trading weak, down by around 150 points and 40 points respectively. However, the BSE-Midcap and the BSE-Smallcap indices are trading higher, up by around 0.2% and 0.3% respectively. The Rupee is trading at 48.26 to the Dollar.

As per a leading business daily, Punj Lloyd plans to raise around US$ 125 to US$ 150 m by issuing fresh shares to the qualified institutional buyers. The company has already confirmed its plans to raise funds but has not yet divulged the amount of funds and instrument to be used. It may be noted that Punj Lloyd is in need of funds to retire its high cost debt and infuse liquidity to fund its projects. In fact, the company's cost of debt stood at around 13.5% during FY09. It also has huge debt with a debt to equity ratio of 1.4:1 at the end of FY09. Further, the company requires funds to service its huge order backlog of around Rs 300 bn (2.5 times its FY09 net sales). At the current market price of Punj Lloyd, the fresh capital is expected to dilute 10% of its existing equity capital. Currently, the stock is trading weak on the bourses.

Software stocks are trading weak led by TCS and Infosys. As per a leading business daily, Infosys has bagged a pilot project to roll out an integrated coach management system (ICMS) for the Indian Railways. The pilot project involves setting up ICMS at three different locations at a cost of Rs 40 m. It is believed that Infosys has emerged as the lowest bidder for this pilot project, which was attended by global companies like Siemens and IFS, besides the Indian majors. Even though the initial project cost is small, the success of this project will decide on the time frame whereby the railway authority will decide to float the final tender for the project, which is estimated at around Rs 2.1 bn. The success of this project would help Infosys oversee final tender projects, which would boost its domestic revenues.

After witnessing a strong rally in the past few days, the Indian bourses have opened the day's trade on a negative note as selling is being witnessed at higher levels. While pharma stocks are trading firm, auto, banking, software and engineering stocks are at the receiving end. The overall decline to advance ratio stood at 1.3: 1 on the NSE. As regards global markets, the US and the European markets ended higher yesterday. The Asian markets are trading mixed currently.

The BSE Sensex is trading lower by around 100 points. The NSE Nifty is down 26 points. The BSE Midcap and the BSE Smallcap indices are trading flat. The rupee is trading at 48.12 to the dollar.

IDFC announced its 1QFY10 results yesterday. The company witnessed a standalone sales growth of 8% YoY, while the consolidated income from operations grew by 14% YoY in 1QFY10. The main reason for the spurt in growth was an increase in revenues from the investment and asset management businesses. The consolidated non-interest income witnessed a 21% YoY growth after lower investment banking and loan related fees in FY09. The cost to income ratio increased from 20% in 1QFY09 to 22% in 1QFY10. Standalone bottomline grew by 19% YoY, while consolidated bottomline grew by 26% YoY in 1QFY10 due to improved other income and lower provisioning. IDFC being a play on the infrastructure story, the management expects the growth to be robust on account of strong government focus. It expects a growth in advances mainly to the road sector during the current year. Finance stocks are trading mixed currently.

Power stocks are trading lower. As per a leading business daily, India will fail to meet its power generation growth goal set for the current year. India is likely to add only 70% of an estimated target of 14.5 GW (1 GW is equal to 1,000 MW) power capacity generation additions during FY10. Even during last year, only 46% of the targeted 7.5 GW was added. Further, the peak power deficit is expected to widen this fiscal to 12.6%. The main reasons cited are slow implementation and coal shortage. While there has been an increase in coal production, it is not to the extent required to meet the demand. Coal fuels at least half of India's installed power generation capacity. Earlier, the ministry had estimated India's coal shortfall to touch 70 MT during FY10. Further, delays from equipment suppliers and other contractors, and delays in acquisition of land and clearance of sites for beginning construction of projects have also played spoilsport. As per estimates, India has to generate an incremental 10,000 MW capacity per year for the next 10 years to plug the demand supply gap. The government has outlined a plan, which envisages an addition of 78,000 MW of generation capacity over the next 5 years. However, with the challenges faced, the target would be difficult to meet.