Intense selling continues on D-street

Fri, 22 Jan 11:30 am

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The Indian markets continued to shed gains during the previous two hours of trade on the back of sustained selling activity among the index heavyweights. Currently, selling activity is being witnessed across all the sectors except FMCG. The stocks from the realty, consumer durables, healthcare and oil & gas sectors are bearing the maximum brunt of profit booking.

The BSE-Sensex and NSE-Nifty are trading weak, down by around 242 points and 77 points respectively. This weakness is being witnessed in the mid and small stocks as well. The BSE-Midcap and the BSE-Smallcap indices are also trading lower, down by around 1.9% and 2.3% respectively. The Rupee is trading at 46.23 to the Dollar.

Indian engineering equipment major, BHEL declared its 3QFY10 results yesterday. The company's sales grew by about 18% YoY, primarily on the back of 19% YoY increase in its 'Power' segment. The operating margins expanded by a decent 2.9% YoY owing to fall in raw material costs and other expenditure (as percentage of sales). Robust margin improvement enabled the company in registering a strong 36% YoY growth in net profits for the quarter. The company's order backlog stood at Rs 1,340 bn at the end of December 2009. It also declared an interim dividend of Rs 11 per share. In the management's view, the company is on track to achieve its sales guidance of Rs 320 bn for FY10, which we believe in all probability is achievable.

According to a leading business daily, there appears to be a significant improvement of credit offtake in the Indian economy suggesting a distinct change in business environment and corporate sentiments. In the period from mid-November 2009 to the end of December 2009, banks lent over Rs 1,180 bn which is nearly 4 times the money lent in the corresponding period of 2008. Lately, banks are seeing a significant rise in demand for loans as the companies' surplus inventories are drying up, triggering the need for working capital loans. The demand for retail loans is also picking up as home buyers are going ahead with their purchases. Also demand increase has been seen from the auto as well as infrastructure sectors. It appears that corporates, which so far tapped the capital markets for funding their working capital needs, are going back to the banks. This appears to be a positive sign for the Indian banking sector. However, despite this surge in credit offtake, banks are estimated to miss the RBI's target of 18% credit growth for FY10.