Closing Bell 25-03-09

Closing Bell 25-03-09

The markets continued to remain volatile on account of alternate bouts of buying and selling activity witnessed during the previous two hours of trade. Stocks from the construction, banking and power sectors are leading the pack of gainers, while select stocks from the telecom, energy and auto sectors are trading weak. The overall advance to decline ratio is poised evenly on the BSE.

The BSE Sensex and the NSE Nifty are trading higher, up by around 125 points and 35 points respectively. The BSE Midcap and Smallcap indices are trading flat. The rupee is trading at 50.90 to the dollar.

Aluminium stocks are trading mixed. While Hindalco is trading higher, Nalco is trading lower. As per a leading business daily, the government has imposed import duty on aluminium products from China in order to safeguard Indian aluminium producers from dumping. It has imposed a 21% and 35% duty on imports of aluminium flat rolled and foils (part of value added products) respectively till 8th October 2009. It may be noted that increased imports of cheaper aluminium products from the Chinese markets had caused tough times for the domestic industry. The total domestic aluminium production stood at around 1.2 m tonnes in FY08, while the imports stood at around 0.3 m tonnes during the same period. The total aluminium consumption stood at around 1.3 m tonnes during the same period. This move by government is likely to have a positive impact on companies like Hindalco whose value added products contribute around 1/4th of the total revenues. However, these products contribute only 10% of Nalco’s revenues and hence the company would not benefit to a greater extent than its peer company.

Banking stocks are trading mixed. While ICICI Bank and HDFC Bank are trading higher, Bank of Baroda is trading lower. As per a leading business daily, ICICI Bank plans to raise tier II capital by issuing bonds of around Rs 1.2 bn through a private placement. The bank will pay 9.95% on these bonds for a period of 15 year. It may be noted that the net interest margins (NIMs) of the bank had improved to 2.4% during the 9mFY09 as compared to 2.2% in 9mFY08. However, this move by the bank to raise the tier II capital at higher rate is likely to put pressure back on the NIMs in future. The bank’s capital adequacy ratio stood at 15.6% in 9mFY09. The funds are raised to meet the liquidity requirements.

Strength in the index stocks helped the benchmark Indian indices to move higher in the previous two hours of trade. While buying activity is being witnessed in stocks from the power, cement and energy space, stocks from the telecom and auto sectors are trading weak. The overall decline to advance ratio is poised at 1 to 1.1 on the BSE.

The BSE Sensex and the NSE Nifty are trading higher, up by around 68 points and 12 points respectively. The BSE Midcap and Smallcap indices are however trading flat. The rupee is trading at 50.96 to the dollar.

As per a leading business daily, GAIL is planning to invest Rs 10 bn to set up 2,000 CNG (compressed natural gas) dispensing stations on major national highways to create a CNG Quadrilateral in the next three years. GAIL Gas, a wholly owned subsidiary of GAIL is planning to invest Rs 1 bn to set up CNG stations in cities along GAIL’s gas pipeline network. Currently, the company operates 400 CNG stations across the country and sells 3.7 mmscmd of gas to automobiles. The CNG run vehicles have risen by nearly two lakh in the past one year to 6.5 lakh units. GAIL has drawn investment plans to take the benefit of increasing demand and government’s initiative to expand reach of the green fuel across the country by increasing the number of authorized city gas distributors to 250 by 2018 from the current 30 cities. The stock of GAIL is leading the pack of gainers in the sector including Reliance Petroleum and Cairn India.

In a measure that will offer some relief to non-deposit accepting NBFCs, the RBI has decided to temporarily relax the capital adequacy requirement for such institutions. The roadmap prepared by the RBI required NBFCs who do not accept deposits to achieve a CAR of 12% by April 2009, as against 10% at present. Also, the CAR was proposed to be enhanced further to 15% from April 2010. In the wake of expensive borrowing scenario and high provisioning requirements, the RBI has decided to allow the NBFCs another year to comply with the capital adequacy norms. This move is expected to benefit institutions like IDFC which is trading higher currently.

The Indian indices began the day on a volatile note as the markets hovered around the dotted line during the opening half-hour of trade. While buying activity is being witnessed in stocks from the realty, software and FMCG space, stocks from the metals and auto sectors are trading weak. The overall decline to advance ratio is poised at 1.3 to 1 on the BSE. Yesterday, the US markets ended on a weak note, while the European markets closed mixed. The Asian indices are currently trading mixed as well.

The BSE Sensex and the NSE Nifty are trading higher, up by around 20 points and 5 points respectively. The BSE Midcap and Smallcap indices are however trading flat. The rupee is trading at 50.96 to the dollar.

Stocks from financial service sector are currently trading mixed. While IDFC is garnering investors’ interest, Tata Finance and HDFC are at the receiving end. As per a leading business daily, HDFC has reduced its retail prime lending rate (RPLR) by 0.5% to 14%. The benefit of this cut in RPLR will accrue to all the existing floating rate customers over the period of next three months. These borrowers will have the choice of either reducing their monthly installments (EMIs) or having their number of installments lowered. HDFC has made this move in order to pass on the benefits of lower interest rates to retain its existing customers. It may be noted that the marginal cost of borrowing had come down earlier this year and that was passed on to its new customers through its special limited period offer.

Power stocks are trading mixed. While the pack of gainers is being led by Reliance Power, CESC and Tata Power, NTPC and JP Hydro are amongst the losers. As per a leading business daily, NTPC is expected to allocate an additional 15% output from its new projects to the home state where the plant is located. Power generated at NTPC plants is allocated to different beneficiary states in accordance with the Gadgil formula. As per the formula, the home state gets 10% as preferential allocation, 15% is kept unallocated at the disposal of the Centre and the balance 75% is allocated to beneficiary states, including the home state, on the basis of their energy consumption and central plan allocation during the previous five years. This move will provide a level playing field to the state-owned power companies that are losing projects to private sector developers who are willing to offer a higher share of power to the home states.