Sensex Opens in Green; S&P BSE Metal Index Rallies 3.1%

Wed, 11 Jan 09:30 am

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Asian markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.18% while the Hang Seng is up 0.83%. The Nikkei 225 is trading up by 0.36%. Stock markets in the US & Europe ended their previous session on a firm note.

Meanwhile, Indian share markets have opened the trading day marginally higher. The BSE Sensex is trading higher by 114 points while the NSE Nifty is trading higher by 39 points. The BSE Mid Cap index and BSE Small Cap index both have opened the day up by 0.4%. The rupee is trading at 68.06 to the US$. All sectoral indices have opened the day in green with metal, banking and capital goods stocks witnessing maximum buying interest.

According to an article in The Economic Times, National Aluminium Company (NALCO) has inaugurated a Research & Technology Centre at Bhubaneswar in order to boost its research initiatives, including development of new products and alloys.

The new research and technology centre would further increase its efforts to meet the R&D requirements in future. The waste utilization, maximizing productivity, reduction of specific consumption and development of new products and alloys are the key research areas that will complement the new business plan being put together by the company.

Notably, NALCO has already registered 29 patents of which five have been commercialized. To ensure sustainability, the company has taken various R&D initiatives. It has entered into an R&D co-operation agreement with Rio Tinto Alcan for development of technology which aims to reduce energy consumption at the smelter by about 5%. An R &D agreement was also signed with Chalieco, China.

Domestically, the aluminium industry faced difficulties in the form of cheap imports from China and other countries. However, the recent rebound in prices internationally provides some hope for the industry. With demand expected to pick up from China, which is one of the largest users of both industrial and precious metals in the near future, prices would likely strengthen further and stabilize.

How much Does China Consume?

China has monopolized metal production and consumption. China accounts for nearly 50% of metal production as well as consumption. In fact, China grew from 12% of the world's metal consumption in 2000 to near 50% today. Going ahead, whether Nalco benefits from the rising alumina price and other factors like China will be the foremost thing to watch out for.

Nalco's share price opened the day up by 2.2%.

Moving on to the news from stocks in banking sector. According to an article in the leading financial daily, Bank of Baroda (BoB) recently lowered interest rate on home loans by 70 basis points (bps) to 8.35% which is the lowest in the industry so far.

In doing so, the bank has decided to offer home loans at its one-year marginal cost of funds-based lending rate (MCLR) without any spread to customers with CIBIL score of 760 and above. A Credit Score or the CIBIL Score is a three-digit numeric summary of your credit history.

Historically, SBI has been the cheapest in the home loan business and its closest rivals offer loans around 5 bps higher than the country's largest bank. This is the first time a nationalized bank has undercut SBI. The move could trigger a rate war as banks are flush with funds, and loan growth since April has been almost negligible during the current financial year, the reports noted.

One of the biggest contributor in India's banking loan book growth is housing loans. Tanushree Banerjee, Co-head of Research, is of the opinion that the overall growth of the banking credit largely depends on the growth of the housing sector. Here's what she has to say:

• "Now since the contribution of the housing loans to total retail loan portfolio is around 54%, the overall growth of the banking credit largely depends on the growth of the housing sector. The recent move by the major banks to move back to the teaser loans clearly indicates their inclination towards the revival in the growth of the housing loan book."

Going forward, whether home loan lending business will continue to be a largely safe business or it will not be as super-safe as it was in the past will be the key thing to watch out for.

Bank of Baroda's share price opened the day up by 0.7%.

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