Sensex slips further

Wed, 27 Jan 11:30 am

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The Indian markets continued to trade on a weak note during the previous two hours of trade. Currently, selling activity is being witnessed across sectors led by stocks from the realty, banking, auto, and metals. FMCG stocks are the sole ones managing to garner investors' interest.

The BSE-Sensex and the NSE-Nifty are currently trading lower by around 251 points and 83 points respectively. Stocks from the midcap and small cap spaces are currently trading in the red, with the BSE-Midcap and the BSE-Smallcap indices trading lower by 1.3% and 1.6% respectively. The rupee is trading at 46.30 to the US dollar.

According to a leading business daily, India's largest carmaker Maruti Suzuki has outperformed its Japanese parent Suzuki Motor Corporation in terms of overall production in 2009. While the parent company rolled out only 9,08,302 cars during CY09, Maruti produced 9,66,399 units and sold even more (9,67,581 units). Out of its total sales, over 86% came from the domestic market primarily on back of robust sales of its small car Alto (2.4 lakhs) and WagonR (1.4 lakh units). In the overseas markets, its flagship export model A-Star was the best performer. It may be noted that the company is going to invest Rs 17 bn in expanding its production capacity at its Manesar plant near Gurgaon by 2.5 lakh units annually by 2012.

We believe that while the Indian growth story in automobiles remains intact, the intensifying competition and headwinds in the form of higher raw material costs and rising interest costs might make it difficult for the company to maintain this performance.

India's largest public sector bank SBI announced its 3QFY10 results recently. The bank registered a 14% YoY growth in its interest income in 9mFY10 and 4% YoY in 3QFY10. Its provisions tripled for the quarter as it provided for incremental slippage and attempted to comply with RBI's provisioning mandate. Addition in employee count resulted in an increase in cost to income ratio which stood at 52% in 9mFY10. It also saw a rise in gross and net NPA (non-performing assets) to 3.1% and 1.9% respectively. The bank's capital adequacy ratio stood at 13.8% at the end of 9mFY10. The bank declared an interim dividend of Rs 10 per share for the quarter. The bank is facing a lot of excess liquidity on account of increased deposits. However, its advances are not increasing in same proportion making it unable to deploy its excess capital effectively.