Markets back at the neutral zone

Fri, 19 Mar 01:30 pm

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   09:30 am   

   11:30 am   

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Selling activity led the Indian markets to shed their gains and drop into the neutral zone during the previous two hours of trade. However, the overall advance to decline ratio stands at about 1.2 times, indicating that the market breadth is still positive. Currently, stocks form the FMCG, auto and telecom spaces are leading the pack of gainers, while those from the realty and IT spaces are amongst the key losers.

The BSE-Sensex is currently trading higher by around 5 points, while the NSE-Nifty is trading marginally lower. 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 0.1% and 0.6% respectively. The rupee is trading at 45.47 to the US dollar.

Banking stocks are currently trading weak led by ICICI Bank, Kotak Bank and Axis Bank. A leading business daily has reported that the fast growing private sector bank, Yes Bank is looking at aggressively increasing its employee size over the next year. The bank, which currently has an employee base of about 3,000 people, plans to scale it up to 4,000 by the end of this year. The new 1,000 odd recruit would include about 500 of managerial level recruits while the balance would be involved in retail service and sales.

As per the management, this strong increase in employee base is in line with the bank's growth plan for the next five years. In addition, the management also discussed some of the industries that the bank has identified as the future growth drivers. These include industries like SMEs, agri-business, infrastructure, energy, healthcare and communications. For the short term, the bank's cost to income ratio is likely to get impacted on the back of the aggressive increase in employees. During 9mFY10, the bank's cost to income ratio stood at 37% as compared to 47% during 9mFY09. This was however mainly due to improved productivity and operating leverage.

Telecom stocks are currently in demand as the companies put in their application bid for the forthcoming 3G spectrum auctions. These auctions are scheduled for April 9. All the telecom majors, Bharti Airtel, Vodafone, Reliance Communications and Tata Teleservices have submitted their applications yesterday, while other players such as Aircel, Idea Cellular, Videocon, amongst others are likely to put in their bids today, the last day for application. Considering that only three slots will be up for sale across the nation with an exception of few states where four slots will be up for sale, there is bound to be an interesting round of auctions. This is especially considering that there are far more players looking to grab some spectrum as compared to what is available. The reserve price for pan-India spectrum has been fixed at Rs 35 bn or about US$ 770 m. Considering that most of the incumbent GSM players have a pan-India presence, they would all be vying for the pan-India spectrum. This could easily set the bid prices to soar. And what makes it even worse is the fact that the price set for this spectrum is already considered to be too high in the first place. Plus, considering that some of the telecom players have been hiving off their passive infrastructure businesses to raise capital for various reasons (including bidding for the spectrum), only confirms the fact that they are ready with their war chest.