Closing Bell 21 april 2009

Closing Bell 21 april 2009

The Indian bourses remained volatile during the previous two hours of trade on account of alternate bouts of buying and selling activity. While the stocks from the realty and FMCG sectors are leading the pack of gainers, select stocks from the banking and auto spaces are trading weak. The overall market breadth is negative with losers outnumbering gainers in the ratio of 1.1 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading weak, down by around 60 points and 10 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading weak, down by 0.5% and 0.1% respectively. The rupee is trading at 50.31 to the dollar.

Engineering stocks are trading mixed. While L&T and Punj Lloyd are trading lower, Alfa Laval is trading higher. Punj Lloyd’s UK subsidiary Simon Carves (SCL) has received an unfavourable ruling in the adjudication process with Sabic UK Petrochemicals. SCL had received a contract in 2006 to design, construct and pre-commission a low density polyethylene plant in UK from Sabic UK Petrochemicals. However, Sabic terminated the contract prior to its agreed completion date. This propelled SCL to seek the views of an adjudicator on the grounds upon which the contract was terminated. SCL sought a restitution of £ 28.5 m, in respect to an advance payment bond and a performance bond called by Sabic. While the adjudication decision has not been in favor of SCL, the company will take the next stage of dispute resolution by putting the matter before the court.

Software stocks are trading mixed. While Wipro and Satyam are trading higher, Infosys is trading lower. As per the Central Statistical Organization (CSO), India’s IT sector is likely to register a single digit growth rate of around 9% in FY09. It may be noted that although the IT sector constitutes a small part of GDP, its contribution to the GDP growth rate is almost the same as the agricultural sector. The IT sector, which has grown at 25% in FY08, had a weight of around 4% in the GDP and contributed 1% to the GDP growth rate during the same period. The Nasscom, however, projects the IT sector to grow at around 12% in FY09.

After the weak start to the day’s trade, the Indian bourses gained ground during the previous two hours on account of an unexpected cut in repo and reverse repo rates by the RBI. It cut rates by 0.25% in its annual policy review. Stocks from the telecom, energy and FMCG sectors are trading firm. However, select engineering and banking stocks are trading weak. The overall market breadth is negative with losers outnumbering gainers in the ratio of 1.7 to 1 on the BSE.

The BSE-Sensex and NSE-Nifty indices are trading weak, down by around 30 points and 10 points respectively. The BSE-Midcap and BSE-Smallcap indices are also trading weak, down by 0.6% and 0.4% respectively. The rupee is trading at 50.32 to the dollar.

Energy stocks are trading mixed. While GAIL and HPCL are trading firm, Gujarat Gas is trading weak. As per a leading business daily, GAIL has entered into an agreement to purchase gas worth US$ 600 m from Indus Gas. The gas would be purchased from Indus Gas’ SGL field in Rajasthan, which is expected to start production within a year. GAIL has committed to a pay or take arrangement for least 90% of the gas supply. The company will initially receive 7 million cubic feet per day. GAIL would supply it to the Ramgarh power plant in Rajasthan, for which it will lay a 100 km pipeline at an estimated cost of Rs 1 bn. This development strengthens the company’s portfolio of assured gas supply and will help increase its transmission revenues.

Banking stocks are trading weak led by Axis Bank and ICICI Bank. Axis Bank announced its quarter and year ended March 2009 results yesterday. The bank’s net interest income grew by 43% YoY during FY09. Its net interest margins grew by 10 basis points (0.1%) to 3.3% for FY09. Net profits grew by a whopping 70% YoY during FY09, aided by 61% YoY growth in other income. The net non-performing asset to advances remained stable at 0.4% at the end of the year. The bank also announced a key change in the management. Ms. Shikha Sharma will replace Dr. P.J. Nayak as the MD and CEO of the bank.