Banking stocks lead the rally

Fri, 23 Apr Closing

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Indian markets closed strong today, led by buying in stocks from the banking and engineering sectors. Metal and pharma stocks however closed in the red. On the broader BSE, there was one gainer for every stock that closed in the negative. Most other key Asian markets closed weak today, led by China (down 0.5%) and Japan (down 0.3%).

The BSE Sensex and NSE Nifty closed with gains of around 120 points (0.7%) and 35 points (0.7%) respectively. Mid and small cap stocks followed suit. The BSE Midcap and BSE Smallcap indices closed up by 0.3% and 0.5% respectively.

The benefits of economic recovery have started flowing into the performance of financial companies. Even companies that have a major focus towards rural areas have benefited from the same. Take for instance Mahindra Finance, one of India's leading non-banking financial companies (NBFCs) focused on the rural and semi-urban regions. The company provides finance for utility vehicles, tractors and cars. As reported by it, for the full year ended March 2010, interest income rose by 12%. The company has also seen a 24% YoY growth on the back of 22% YoY growth in assets under management. However, what ailed the company during the year was a decline in its net interest margin. This declined to 6%, from 6.9% in FY09. Anyways, helped by higher other income and write-back of provisioning, the company grew its net profits by 61% YoY during the year. The stock closed strong today. Other gainers from among its peers included Sundaram Finance and SREI Infra Finance.

Software stocks closed weak today. Key losers included Wipro and TCS. Earlier during the day, a leading business daily reported how these companies, along with Infosys and IBM are competing against each other to get a share of the Bharti-Zain technology deal. Bharti Airtel has invited bids to outsource operations worth over a billion dollars for African assets it recently acquired from Kuwait's Zain Telecom. IBM seems to have an upper edge here as the company is already handling Bharti's Indian and Sri Lankan IT requirements since 2004. But Bharti would still like to get the best deal from these players given the scale of its operations in Africa.

Stocks of fertiliser companies closed strong today. Key gainers included Tata Chemicals, Deepak Fertiliser, and Rallis. Gains in Rallis were seemingly a result of the good financial performance reported by the company for the full year FY10. While sales grew by 5%, net profits were up 41%. The strong performance on the profit front was due to an improvement in operating margins. These improved from 16% in FY09 to 19.4% in FY10 on the back of lower raw material costs. The company has announced a dividend of Rs 10 per share (yield of 0.7%). It has also announced a bonus issue in the ratio of one equity share for every two shares held in the company.