Mid and small cap indices outshine

Thu, 10 Apr Closing

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Maintaining the day long positive momentum, the benchmark indices recorded new highs today. They subsequently however closed on a flat note as the profit-taking took a toll. The euphoria in markets was on account of heavy buying interest witnessed in the cyclical sectors such as capital goods, banks and automobiles. Notably, the BSE Small Cap and BSE Mid Cap indices outshined the benchmark indices and were up by 0.6% each. The BSE-Sensex closed higher by 13 points and the NSE-Nifty was closed unchanged.

On the global front, barring few, most of the Asian indices closed the day on a firm note whereas most of the European indices opened the day on a weak note. The rupee was trading at Rs 60.11 to the dollar at the time of writing.

Barring few such as Indian Bank, Union Bank and State Bank of India (SBI) most of the PSU bank stocks closed the day on a weak note. UCO Bank and Central Bank led the pack of losers.

As per a leading financial daily, the International Monetary Fund (IMF) has warned that Indian banks lack sufficient buffers to withstand unanticipated losses. The fund also fears depletion of capital for these banks if the credit quality continues to deteriorate. According to the IMF's global report, the Indian banks have not made sufficient provisions out of profits to cover bad loans in comparison to global peers. The fund also cited that fluctuations in currency could impact the earnings of Indian companies. Exchange rate and foreign currency risks would depress the earnings. Moreover, if the foreign currency liabilities are hedged through natural hedges, then the foreign exchange losses could amount to 20 to 30% of earnings in India. Overall, IMF believes that while the financial stability has strengthened in advanced economies, the emerging economies like India have witnessed deterioration.

Barring few such as EMCO Ltd, Welspun Corp and Opto circuits amongst few others, most of the engineering stocks closed the day today on a firm note. Stocks such as BEML Ltd and Bharat Electronics led the pack of gainers.

As per an article in Reuters, the power equipment maker Crompton Greaves is expected to report a turnaround in earnings for the fourth quarter of FY14. The anticipated recovery in the overseas business coupled with healthy export orders is expected to drive the fourth quarter earnings for the company.

The financial performance of the company demonstrated stark improvement during the third quarter of FY14 backed by culmination of the restructuring exercise in Belgium and cost rationalization efforts. However, challenges in the overseas markets continue to persist especially in the power systems segment.