Positive start to the week

Mon, 26 Apr 09:30 am

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The Indian markets have started today's session on a positive note. The benchmark indices opened at the breakeven mark but quickly moved into the positive. They have managed to stay in the green since then. Other key Asian markets are trading in the green with Japan (up 2.1%) leading the pack of gainers. The US markets closed higher by 0.6% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading strong with banking, auto and metal majors finding investors' favour. The BSE-Sensex is trading higher by around 84 points, while the NSE-Nifty is up by about 22 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.6% and 0.8% respectively. The rupee is trading at 44.45 to the US dollar.

Energy stocks have opened the day on a positive note. Gainers here include Cairn India and Gujarat Gas. Reliance Industries announced its FY10 results. The company posted a topline growth of 36% YoY during FY10 led by a 51% growth in the company's refining business. Revenues from the petrochemical business grew by 5% YoY, while the exploration and production business grew nearly 4 times during the year. Gross refining margins stood at US$ 6.6 per barrel during FY10, as compared to US$ 12.2 per barrel in FY09. Operating margins decline by 0.8% YoY to 15.9%. This is largely on account of higher raw material costs, as a percentage of sales. Net profits grew by 6% YoY during the quarter on the back of topline growth despite lower margins. During the year, the company entered into a joint venture with US based Atlas Energy, under which it will acquire a 40% interest in Atlas's Marcellus Shale acreage. Reliance also surrendered the EOU status of its refinery to allow domestic sales.

Banking stocks have opened the day on a positive note. Gainers here include Axis Bank and HDFC Bank. Recently teaser offers for home loans have been in the headlines. HDFC Bank and ICICI Bank have re-launched their offers. As per a leading business daily, the finance ministry may bar public sector banks from launching similar teaser loan schemes. In our view, the finance ministry is worried that these offers could start a rate war that will increase the bad loans of banks. It may be noted that among the public sector banks SBI, Canara Bank, Union Bank of India and IDBI already have teaser offers. Besides the risk of bad loans, we believe such rates are against the credit-tightening measures taken by the RBI. Interestingly, a more transparent 'base rate' system for loans is set to come into effect from July this year.