Metal, realty least preferred today

Tue, 14 Jan Closing

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Persistent selling pressure led the Indian markets to move deeper into the red as the day progressed. The BSE-Sensex closed lower by about 100 points or 0.5%, while the NSE-Nifty ended lower by about 31 points or 0.5%. Mid and smallcaps ended the day on a weak note as well with the respective indices down by about 0.4% and 0.3% respectively. Stocks from the metal and realty spaces were amongst the tops losers today.

Stock markets in other parts of Asia closed on a weak note with Hong Kong and Japan down by about 0.4% and 3.1% respectively, while China ended higher by about 0.9%. The rupee was trading at Rs 61.52 to the dollar at the time of writing.

Stocks of auto ancillary companies ended the day on a weak note with Munjal Showa, NRB Bearing and Amara Raja Batteries being the top losers. Battery maker Exide Industries announced its results for the quarter ended December 2013 recently. The company reported an 11% YoY decline in revenues while profits declined by over 25% YoY. The decline in financial performance was on the back of weak auto sales volumes which reduced demand from the original equipment manufacturers. However, what also impacted the company's results was the poor demand from the replacement market, especially the commercial vehicle segment. Further, the company's industrial segment - which caters to the infra, telecom, and inverter batteries segment -performed poorly as well. The stock of Exide Industries ended on a weak note yesterday, and the weakness seemed to have continued today as well. Currently, the stock is trading at its 52-week low level.

Banking stocks ended the day on a weak note led by Canara Bank, Union Bank and ICICI Bank. As per the management of India's largest bank State Bank of India, the contraction in factory output is likely to put additional pressure on the already fragile asset quality of banks. With manufacturing and midsized companies facing stress, the bank is likely to face pressures in the coming future. As per the company's management, it is looking to work with its partnered banks to keep the level of non-performing assets at minimum. IIP numbers for the month of November showed a contraction of 2.1%. For the eight month period ended November 2013 the contraction came in at 0.2%. During the corresponding period last year, IIP numbers were higher by 0.9%. While SBI has not yet announced its results for the quarter ended December 2013 yet, its net non performing assets increased from 2.4% in 2QFY13 to 2.9% in 2QFY14, thereby marking continued asset quality pressures.