Metals, realty stocks open weak

Fri, 11 Feb 09:30 am

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Asian markets have opened mixed today. While modest gains are seen in China and Hong Kong, selling pressure persists in Japan and Singapore. The US markets closed marginally in the red yesterday. As for the Indian markets, these have yet again opened in the negative, though very marginally. The selling is currently being led by stocks from the realty and metal sectors.

The BSE-Sensex is trading lower by around 20 points (0.1%), while the NSE-Nifty is down by about 5 points (0.1%). The BSE Midcap and BSE Small cap indices are also trading marginally in the red. The rupee is trading at 45.74 to the US dollar.

Engineering stocks have opened today on a mixed note. While gains are seen in Crompton Greaves and ABB, selling pressure marks trading in Suzlon and Punj Lloyd. The woes for wind power equipment major Suzlon do not seem to be nearing an end. While the company has recently seen a rise in its order inflows, high debt on its balance sheet remains the biggest scare for it, and the investors. The financial performance isn't improving as well. In the latest completed quarter, the company reported a 21% dip in its consolidated net sales. This was largely led by a weak performance from its subsidiary Repower, which reported a 23% YoY decline in sales. On the bottomline front, the company reported a net loss of Rs 2.5 bn, as compared to a profit of Rs 141 m in the corresponding quarter of the previous year. Suzlon's case is a clear example of aggressive growth plans gone awry. The company has built up huge debt on its books to fund its mindless expansion, and is now paying the price for it. The debt-equity ratio stands at 1.5 times, which is high and concerning by any standards.

PSU banking stocks have also opened mixed. Bank of India and OBC are trading strong. On the other hand, Union Bank and Vijaya Bank are witnessing selling pressure. As per a leading business daily, India's largest bank SBI has raised Rs 15 bn through issue of bonds to foreign investors. This comes even as the bank awaits the government's permission to raise Rs 200 bn through rights issue to fund future credit growth. This is the third bond issue by SBI in FY11, as the bank has already raised US$ 1 bn and US$ 750 m in July and November 2010 respectively. The bank will be paying a coupon of 3.37% for the latest issue. The bank had recently announced its 3QFY11 results, wherein it reported a 44% YoY growth in its net interest income. This was led by a 22% YoY growth in advances. The bank also managed to improve its net interest margin (NIM) to 3.4% during 9mFY11, from 2.6% in 9mFY10. This improvement in NIM was led by a strong growth in its low cost deposit base, or CASA.