No respite from selling pressure

Fri, 21 Jan Closing

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   Pre-Open   

   09:30 am   

   11:30 am   

   01:30 pm   

Markets languished in the red throughout the trading session today. Although there were attempts to move into the positive these proved futile, as fresh bouts of selling activity pushed the indices lower. There was no respite in the final trading hour either as the indices closed below the dotted line. While the BSE-Sensex closed lower by around 39 points (down 0.2%), the Nse-Nifty closed lower by 15 points (down 0.3%). The BSE Midcap and the BSE Small cap, however, bucked the trend as they notched gains of 0.2% and 0.5% respectively. Losses were largely seen in IT, FMCG and metals stocks.

As regards global markets, most Asian indices closed mixed today, while European indices have opened in the positive. The rupee was trading at Rs 45.68 to the dollar at the time of writing.

ITC announced its 3QFY11 results a while ago. The company's top line grew by 18.6% YoY in 3QFY11, bolstered by a strong growth in FMCG (including cigarettes), hotels, paper and packaging and agriculture businesses. Operating (EBITDA) margins increased marginally as all costs remained flat (as a percentage of sales). The rise in raw material costs was offset by fall in other expenditure (both as a percentage of sales). Net profit grew by 21.4% YoY during the quarter. This increase was a result of growth in operating income, higher other income and fall in effective tax rate. Net profit growth could have been higher but for the increase in interest expense. For 9mFY11, ITC's net profits grew by 22.2% YoY, while net profit margins expanded by 1% to 23.9%. This performance came on the back of higher operating income, increase in other income, fall in interest costs, lower depreciation charges and lower effective tax rate. The stock closed lower today.

Private banking stocks closed mixed today. While ICICI Bank found favour, HDFC Bank and ING Vysya Bank closed in the red. ING Vysya Bank announced its 3QFY11 results. Net interest income increased by 12% YoY during the quarter. Net interest margin (NIMs) dipped from 3.4% in 3QFY10 to 3.1% in 3QFY11 despite higher proportion of CASA. The company's cost to income ratio increased from 58.3% in 3QFY10 to 61.4% in 3QFY11. Bottomline grew by 37% YoY due to a steep decline in provisioning costs. Net NPA ratio fell from 1.67% in 3QFY10 to 0.6% in 3QFY11. The capital adequacy ratio declined to 12.7% from 14.5% in 3QFY10.

There was some relief on the food inflation front. The wholesale price index for food was up 15.5% for the week ended January 8 from a year ago, down from 16.9% in the previous week. This is because prices of vegetables dropped for the first time in more than six weeks. The index for vegetables, the biggest contributor to the surge in food prices, dropped 3.6% during the week. That said, there was no respite from rising onion prices. The wholesale prices of onion almost doubled from the levels last year, climbing nearly 15% during the week. Indeed, India's overall inflation has refused to come down due to high food prices. This has put added pressure on RBI to continue with its policy tightening measures.