Weak start to the week

Mon, 3 May 09:30 am

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The Indian markets have started today's session on a negative note. The benchmark indices opened below the breakeven mark and soon moved further into the red. They have not managed to pare their losses since then. Other key Asian markets are in the red with Hong Kong (down 1.4%) leading the pack of losers. The US markets closed lower by 1.4% last Friday.

Currently in India, heavyweights from the BSE-Sensex are trading weak with metal and software majors facing the brunt of selling activity. The BSE-Sensex is trading lower by around 92 points, while the NSE-Nifty is down by about 35 points. However, buying interest is being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.1% each. The rupee is trading at 44.49 to the US dollar.

FMCG stocks have opened the day on a negative note. Losers here include Hindustan Unilever and Pidilite Industries. As per a leading business daily, Hindustan Unilever plans to deploy nearly 4,000 of its staff this week to visit 20,000 kirana stores and chemists in 72 cities. They will arrange the product display of the stores to resemble organised retail stores. Proper segmentation and arranging of products helps the customer navigate the store better and could help boost sales by 30%. This drive reflects the company's wish to get out of the corporate ivory tower and reconnect to the India growth story, something the FMCG giant has apparently missed, thereby giving a chance to competitors to acquire market share. Although it is too early to call, we believe this is a step in the right direction with attention now being paid on distribution and not only on advertising.

Banking stocks have also opened the day on a negative note. Losers here include Central Bank and Union Bank. Bank of Baroda declared its FY10 results recently. The bank reported a 11% YoY growth in interest income for the year on the back of a 22% YoY growth in advances. Other income grew by 2% YoY backed by lower growth in treasury income. Having an exposure of 25% of its advances in overseas markets did not do any good to the bank. With yields on overseas assets getting re-priced substantially lower, global net interest margins (NIMs) dropped from 2.9% in FY09 to 2.7% in FY10. Net profits for the year grew by 37% YoY. Net NPAs moved up from 0.31% in FY09 to 0.34% in FY10. Capital adequacy ratio remained comfortable at 14.4% at the end of FY10.