Closing Bell 18-03-09

Realty leads the show, again

The Indian markets shed a part of their gains during the final hour of trade on the back of profit booking. However, they ended the day well above yesterday’s closing level. The BSE-Sensex closed with gains of around 110 points, while the NSE-Nifty closed higher by 40 points. Stocks from the mid-cap and small-cap indices ended the day in the green as well. Buying activity was witnessed in stocks across sectors, with realty and metal leading the pack of gainers. However, the BSE-FMCG Index ended the day in the red.

Most other Asian markets closed on a firm note. The European indices are currently trading mixed. Rupee was trading at 51.34 against the US dollar at the time of writing.

Real estate stocks ended the day on a firm note led by Akruti City, Mahindra Lifespace, DLF and HDIL. Stocks from the real estate sector have been amongst the worst performers in the past one year. This is mainly on account of lower demand and liquidity issues. In fact, until last week, the BSE Realty Index had fallen by nearly 46% since the beginning of 2009. However, the index has been amongst the top gainers in the past few trading sessions. The reason behind the same is price cuts in the range of nearly 30% to 40% announced by real estate players. While this move may impact their margins significantly, it will benefit the companies by reducing their inventory, bringing about much needed liquidity. It may be noted that a handful of realty players are sitting on stock pile of projects that were launched a year back.

Auto stocks ended the day on a firm note led by Bajaj Auto and Ashok Leyland. As per a leading business daily, M&M has recently inaugurated its defence auto facility at Faridabad. This facility has the capability to produce nearly 200 specialised vehicles, which will be used by the armed forces, paramilitary and the police. However, it plans to increase the capacity to 350 units in the next fiscal. This facility will also produce bullet-proof versions of its multi-utility vehicles such as Scorpio and Bolero. With sales of the mainstream auto market drying up, companies such as M&M, which have a certain amount of exposure in the defense area, have been focusing on increasing defence supplies.

As per a report issued by McKinsey & Company, India is likely to face a shortfall of nearly US$ 150 bn to US$ 190 bn in funding its infrastructure projects in the current five-year plan period (FY07 to FY12). The reason behind this view is the global economic slowdown and rising interest rates, which have made project financing expensive and financial closure more difficult. It may be noted that the Planning Commission had earlier envisaged infrastructure investments to the tune of US$ 500 bn. Of this, nearly one-fourth was to be spent by private sector and the balance by the public sector.

RIL eyes Cairn’s output

The Indian markets continued their northward journey on account of sustained buying activity witnessed during the previous two hours of trade. Stocks from the realty, metals and banking sectors are leading the pack of gainers, while select stocks from the FMCG and auto sectors are trading weak. The overall advance to decline ratio is poised at 2.2 to 1 on the BSE.

The BSE-Sensex and the NSE-Nifty indices are trading higher, up by around 235 points and 75 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading higher, up by 3% and 2.6% respectively. The rupee is trading at 51.35 to the dollar.

Banking stocks are trading higher led by PNB, SBI and ICICI Bank. As per a leading business daily, India’s second largest public sector lender Punjab National Bank expects a credit growth of around 25% this fiscal and 20% to 25% in FY10. The bank plans to continue its thrust in reducing its non-performing assets (NPA) which currently stand at around Rs 320 bn. In fact, gross NPAs have declined from 4.1% in 9mFY08 to 2.3% in 9mFY09, while net NPAs have dropped from 1.3% to 0.4% during the same period.

Energy stocks are trading mixed. While Reliance Industries and ONGC are trading higher, IOC is trading lower. As per a leading business daily, Reliance Industries (RIL) is keen on buying crude oil from Cairn India’s Rajasthan fields at a time when the petroleum ministry is finding it difficult to find buyers among the Oil PSUs. It may be noted that the three oil fields in Rajasthan are believed to have a peak output of around 175,000 barrels per day (bpd). RIL has a requirement of around 30,000 bpd to 60,000 bpd of crude from these fields at each of its two refineries in Jamnagar. In fact, RIL is also willing to invest in setting up the infrastructure that will allow it use the crude from these fields and is awaiting the government’s clearance for the same. Interestingly, Essar Oil is also in line to buy the crude output for its Vadinar refinery.

Panacea vaccine sales take a hit

The markets made further inroads in the positive territory as buying activity continued across the index heavyweights. Stocks from the realty, metals and engineering sectors are leading the pack of gainers. However, the select telecom and auto stocks are trading weak. The overall advance to decline ratio is poised at 2.5 to 1 on the BSE.

The BSE Sensex and the NSE Nifty are trading higher, up by around 200 points and 60 points respectively. The BSE Midcap and Smallcap indices are also trading higher, up by 2.9% and 2.5% respectively. The rupee is trading at 51.33 to the dollar.

Pharma stocks are trading firm led Wockhardt and Biocon. As per a leading business daily, Indian drug regulator has asked Panacea Biotec to stop selling of some of its oral polio vaccines (OPV) on a recommendation by the World Health Organisation (WHO). As such, the company’s monovalent OPVI1 (mOPV1) vaccine does not have the required potency as per the test conducted by WHO in 2008. The company sells OPV in India through United Nations Children’s Fund (Unicef). The company has sold 541 m doses of mOPV1 and 170 m doses of mOPV3 to Unicef for supplying in the Indian market during the current fiscal. It may be noted that Panacea Biotec had 70% market share in the Indian OPVs segment in FY08. OPV contributes around 90% to the company’s revenues and hence this would affect its revenues going forward.

Software stocks are also trading firm led by HCL Tech. and TCS. As per a leading business daily, Infosys BPO arm has terminated around 600 contract workers during February 2009. This move is attributed to rationalization of variable costs. However, the company had not laid-off the employees on direct pay rolls. BPO segment has total strength of 17,000 employees. The segment contributes to around 5% of Infosys’s total revenues.

ICICI Bank’s ‘core’ focus

Taking cues from their global peers, the Indian markets have started the day’s proceedings on a positive note. Buying activity is being witnessed across the board. While stocks from the realty, banking and metal sectors are garnering investors’ interest, stocks from the FMCG and PSU sectors are out of favour. The overall advance to decline ratio is poised at 3 to 1 on the BSE. As regards the global markets, while the US market ended firm, European markets ended flat yesterday. The Asian markets are currently trading mixed.

The BSE Sensex and the NSE Nifty are trading higher, up by around 158 points and 56 points respectively. The BSE Midcap and Smallcap indices are trading higher, up by 2% each. The rupee is trading at 51.46 to the dollar.

Energy stocks are currently trading mixed. While GSPL, Cairn India and Chennai Petro are leading the pack of gainers, HPCL, BPCL and IOC are leading the pack of losers. As per a leading business daily, a proposal has been floated by government officials to curb the dominance of IOC in petroleum fuel retailing. Interestingly, this proposal came in existence after a strike in January 2009 by employees of IOC and BPCL which led to a countrywide shortage of oil. According to the proposal, some of the petrol pumps which are being run by IOC will be distributed among BPCL and HPCL. It may be noted that fuel retail in India is the monopoly of three state-owned oil companies IOC, BPCL and HPCL and with 17,600 petrol pumps IOC is the largest fuel retailer that controls about 50% of the market. Once this proposal gets approved it will help in reorganizing the retail fuel market and benefit HPCL and BPCL going forward.

Banking stocks are currently trading firm led by Axis Bank, ICICI Bank and Kotak Bank. As per a leading business daily, ICICI Bank is planning to transfer its ATM and point-of-sale (PoS) terminals to a separate company. The bank has sought bids from banking technology companies and private equity players for participating in the proposed entity. Earlier, SBI had signed a deal with TCS wherein 300 ATMs were outsourced, with the bank paying a rent for every transaction. Other state-owned banks such as Bank of India, United Bank and Dena Bank also have outsourcing deals with Fidelity National Information Service for this service. It may be noted that ICICI Bank has more than 4,000 ATM machines and over 2,00,000 PoS terminals. Since ATM management is not really a core-banking activity this move is likely to help the bank concentrate on its core business activity.