Markets take CRR in their stride!

Fri, 29 Jan Closing

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   Pre-Open   

   09:30 am   

   11:30 am   

   01:30 pm   

It was yesterday all over again as the indices managed to eke out small gains for themselves in what could be considered as another volatile session. While the Sensex edged higher by around 50 points (up 0.3%), NSE Nifty closed with gains of around 20 points (up 0.4%). BSE Midcap and BSE Small cap indices also remained buoyant today, ending with gains in the region of 1% each. Advance to decline ratio was once again evenly split on the Sensex with one stock declining for every one that advanced.

Major Asian indices closed lower today while European indices are trading mostly strong currently. Rupee was trading at 46.3 to the dollar at the time of writing.

The markets ending higher despite RBI initiating steps towards sucking excess liquidity in the system sends out one clear message. The message that the system is awash with funds and a CRR hike to the tune of 0.75% is likely to have no impact and it will be business as usual. Furthermore, markets were also buoyed by the upward revision of India’s GDP growth by the central bank. Thus, with the monetary policy done and dusted with, it is over to the Union Budget now. Of course, any negative development on the global front is also likely to have an impact on the market movement. But as far as the impact of monetary policy is concerned, it has rather turned out to be a non-event.

Steel majors like Jindal Steel, SAIL and Tata Steel all ended weak today. The weakness in Tata Steel was despite robust numbers posted by the company for the quarter ended December 2010. The company’s standalone topline grew by 33% YoY on account of a 49% growth in volumes. EBITDA margins also expanded and with significantly higher other income and lower forex losses, the bottomline witnessed a strong growth of 156% YoY. As a result of this strong performance, numbers for the nine month period also improved a bit with the bottomline decline standing at 23% on the back of a 1% drop in topline. The company also mentioned that its Corus operations in Europe are witnessing signs of revival and these developments indeed augur well for the future growth of the company.

Shipping major GE Shipping also announced its results. Consolidated sales declined by 27% YoY during 3QFY10 and 31% YoY during 9mFY10. Operating margins fell to 23% in 3QFY10, from 38.6% in 3QFY09. Higher staff costs and sharp rise in cost of hiring chartered ships were the key culprits. On the back of lower sales, weaker operating margins, and higher depreciation, net profits declined by 68% YoY during the quarter. Profits were down 72% YoY during the nine-month period. For the current fiscal, the management continues to see the demand outlook to be very weak, both for the crude oil and dry bulk segments. On oil, it believes that contraction in world output is likely to depress energy consumption more so in the energy intensive OECD countries. To add to this, high fleet growth (net addition to the global fleet is expected to be around 8-14% during the current year) will continue to cast its dark shadows. Both these factors put together are likely to keep pressurizing rates and utilization levels for the crude tanker segment.