Heavyweights take the markets down

Mon, 1 Feb 09:30 am

   Previous Close   

   Pre-Open   

   11:30 am   

   01:30 pm   

   Closing   

Indian markets have started today's session on a weak note. The benchmark indices opened way below the breakeven mark and have not managed to make any progress towards the positive territory since then. Other key Asian markets are trading in the red with China (down 2.2%) leading the pack of losers. The US markets closed lower by 0.5% yesterday.

Currently in India, heavyweights from the BSE-Sensex are trading in the red with software and banking stocks facing the brunt of selling activity. The BSE-Sensex is trading lower by around 145 points, while the NSE-Nifty is down by about 35 points. However, buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 1.2% respectively. The rupee is trading at 46.3 to the US dollar.

Banking stocks have opened the day on a negative note. Losers here include IDBI Bank and PNB. As per a leading business daily, India's largest lender SBI plans to raise Rs 200 bn through equity in the next two years. The bank has a capital requirement of Rs 500 bn over the next five years. It expects to generate more than half of the amount through internal accruals. The rest will be raised through equity. SBI currently has excess liquidity of around Rs 750 bn. This is exerting pressure on its margins but is likely to continue for about six months during which it expects to shed bulk deposits around Rs 200 bn. In our view, the excess liquidity reflects the banks efforts to tap into its relationships with large corporates as well as retail customers and grow its deposit base. However, not all of it could be deployed profitably. As a result, the bank witnessed nearly 0.6% drop in net interest margins in 3QFY10.

Energy stocks have opened the day on a mixed note. Gainers here include BPCL and HPCL. Cairn India is in the red. As per a leading business daily, the government is considering hiving off ONGC's Assam oilfields into a wholly owned subsidiary in order to improve their productivity. The company produces 1.1 m tonnes per annum of crude oil from the Assam fields, employing a workforce of over 4,000. Interestingly, the other state-owned upstream company Oil India is willing to take over the Assam oilfields, which it believes it can run more efficiently than ONGC. It may be noted that the formal announcement for the hiving off has not been made. In our view, Oil India's contention makes sense given its extensive experience in onshore operations especially in the North East.