Healthcare, FMCG aid the indices

Fri, 19 Mar 11:30 am

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   09:30 am   

   01:30 pm   

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Despite some volatility, the Indian markets managed to hold on to opening gains and traded on a strong note during the previous two hours of trade. Currently, buying activity is being witnessed across all sectors with stocks from consumer durables, healthcare, FMCG, realty, auto and capital goods sectors leading the pack of gainers. Realty and IT sectors are the only ones to be on the receiving end.

The BSE-Sensex and the NSE-Nifty are currently trading higher by around 32 points and 10 points respectively. Stocks from the midcap and small cap spaces are trading in the green, with the BSE-Midcap and the BSE-Smallcap indices trading higher by 0.4% and 0.7% respectively. The rupee is trading at 45.45 to the US dollar.

Currently, engineering and construction major, Punj Lloyd is trading in the green. According to a leading business daily, Punj Lloyd has won an order worth US$ 40 m from Abu Dhabi Gas Industries (GASCO).As per the deal, Punj Lloyd will be responsible for engineering, procurement and construction of NGI Project in UAE.

Punj Lloyd provides integrated design, engineering, procurement, construction and project management services for the energy industry and also infrastructure projects. It may be noted that the company recently announced that it expects to gather work-orders to the tune of Rs 30 bn from energy sector in both domestic and overseas markets in FY11. Further, around half of these orders are expected to come from state-owned ONGC. The company is upbeat about the investment happening in the infrastructure, power and energy sectors in India. Going forward, it sees a lot of potential for growth in these sectors and aims to aggressively tap these markets in India and abroad. Though we are enthused by the company’s focus on infrastructure market, recurring and unexpected cost overruns and project delays remain a big concern.

According to a leading business daily, state-owned lender, Union Bank of India (UBI) is in talks with various asset reconstruction companies (ARCs) in order to sell a part of its bad loans as an attempt to clean its balance sheet. To this end, the bank plans to sell off Rs 1 bn of its bad loans by end of this fiscal i.e. March 2010. It may be noted that it has already sold Rs 2 bn worth bad assets so far in FY10. The bidding process for this asset sell-off is underway.

As of now, the bank has a gross NPA (non-performing assets) level of 2.4% with the net NPAs standing at 1.21%. It has a loan book of arounf Rs 430 bn with a total deposit-base standing at Rs 670 bn. We believe this restructuring attempt for cleaning its loan book is a prudent move by the bank. If it manages to curb the deterioration of margins and asset quality, with its healthy mix of current and savings account, it is poised to do well going forward. Currently, UBI is trading in the red.