Banks drive indices to strong finish

Mon, 18 Jan Closing

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   Pre-Open   

   09:30 am   

   11:30 am   

   01:30 pm   

After a weak opening, strong buying activity in the index heavyweights propelled the indices to stay well above the dotted line throughout the day. Although profit booking was witnessed at higher levels, the indices managed to hold on to their gains and close well into the positive. While the BSE Sensex closed higher by around 87 points (up 0.5%), the NSE Nifty gained around 23 points (up 0.4%). Midcap and smallcap stocks also registered gains of 0.6% each. While banking and auto stocks led the pack of gainers, healthcare and metals stocks were at the receiving end.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 45.66 to the dollar at the time of writing.

Software stocks closed firm today led by TCS, Wipro and Infosys. Software major TCS announced its 3QFY10 results late Friday. The company’s net sales grew by 3% QoQ in 3QFY10. This was largely aided by a 6.6% QoQ increase in volumes. The major growth driver was the banking and financial services (BFS) segment, which contributed around 45% to TCS' consolidated revenues. Operating margins expanded by 1.2% QoQ during the quarter, largely on account of better utilization and cost containment. Aided by better margins and higher other income, net profits rose by 11% QoQ during the quarter. Profit growth for 9mFY10 stood at a robust 27% YoY. TCS added 32 new clients and 7,692 employees (net) during the quarter. Attrition rate stood at 11.5% at the end of 3QFY10 (as against 11.4% at the end of previous quarter).

Pharma stocks closed mixed today. While Glenmark and Piramal Healthcare found favour, Dr.Reddy’s and Sun Pharma closed in the red. Glenmark closed 2% higher today. Infact, the stock price has doubled since the rally began in March 2009. Having said that, 2009 was not particularly a good year for the company as the global economic slowdown had an adverse impact on its business, especially during the last two quarters of FY09. Setbacks in its R&D programme also did not help matters. Discontinuation of research on one molecule out-licensed to Eli Lilly and negative results with respect to its lead compound 'Oglemilast' out-licensed to Forest Laboratories were the setbacks that Glenmark had to contend with. Having said that, the company still has a strong R&D pipeline as compared to its peers and prospects are expected to improve going forward as various businesses pick up.

Axis Bank announced its 3QFY10 and 9mFY10 results on Friday. The bank’s net interest income rose by 11% YoY during 9mFY10 on the back of 13% YoY growth in advances. Net interest margins (NIM) moved up to 4.0% in 9mFY10 from 3.1% in 9mFY09. With a higher proportion of CASA, the differential in lending and borrowing rates aided the improvement in the bank’s NIMs. The management believes that the same may not be sustained going forward as the cost of funds rise and the bank’s leverage increases. Net profits grew by 42% YoY backed by strong traction in other income (up 47% YoY), despite higher provisioning. Net NPA to advances was marginally higher at 0.5% at the end of 9mFY10 as against 0.4% in 9mFY09. The management believes that the NPA and restructured assets have already peaked in FY10 and unlikely to show significant slippages going ahead. Capital adequacy ratio (CAR) was higher at 16.8% at the end of 9mFY10 after capital raising in 2QFY10. The bank closed higher today.