US shockwave hits Indian markets

Fri, 7 May 09:30 am

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The Indian markets have started today's session on an extremely 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 Japan (down 4%) leading the pack of losers. The US markets closed lower by 3.2% yesterday. At one point, the Dow fell by almost 1,000 points, a 9.2 % decline that was its largest point drop ever, before paring losses. Currently in India, heavyweights from the BSE-Sensex are trading weak with metal and realty majors facing the brunt of selling activity. The BSE-Sensex is trading lower by around 224 points, while the NSE-Nifty is down by about 71 points. Selling interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 1.7% and 1.9% respectively. The rupee is trading at 45.31 to the US dollar.

Banking stocks have opened the day on a negative note. Losers here include SBI and PNB. As per a leading business daily, SBI has revived a scheme under which irrigation and crop loans will be made available to farmers at cheap rates. The scheme was first introduced last year after the weak monsoons. Under this scheme, SBI will offer all fresh minor irrigation loans at 8.5% in the first year and 9.5% for the second and third years. The loan will be up to Rs 2.5 m. It may be noted that normally the rates would be around 10.5% to 13.25%. The bank will also offer crop loans up to Rs 2.5 m at 10% for a period of 1 year. In both the categories, small loans, i.e. under Rs 300,000 will attract interest rates of 7%. Interestingly, the bank will give a concession of 1% for timely repayment. In case of small loans, the concession will be 2%. In our view, it is significant that this move comes soon after SBI extended its special home loans scheme till the end of June 2010. It indicates the desire of the banking giant to step up its credit disbursal.

Pharma stocks have also opened the day on a negative note. Losers here include Cipla and Glenmark. Dr.Reddy's announced its FY10 results. The company reported a revenue growth of a mere 1% YoY in FY10 largely due to decline in sales from US and Europe. A fall in R&D and other expenses (as percentage of sales) led to the 1.7% improvement in operating margins during the year. Profit before tax grew by an impressive 34% YoY due to a considerable reduction in interest costs. The company reported a profit of Rs 3.5 bn at the net level as compared to a loss in FY09. The loss last fiscal was on account of impairment of intangible assets and goodwill related to Betapharm. On excluding the exceptional items from both the periods, net profits grew by 48% YoY.