Realty weighs on Indian stock markets

Wed, 25 May 09:30 am

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Most Asian stock markets have opened in the red. Stock markets in South Korea (down 0.7%), Japan (down 0.4%), Indonesia (down 0.4%) and Hong Kong (down 0.5%) are leading the losses. The Indian stock markets have opened the day on a firm note. Stocks in the realty and technology space are leading the pack of losers. However, metal and consumer durable stocks are trading firm.

The BSE-Sensex is trading lower by around 49 points (0.3%), while the NSE-Nifty is down by around 15 points (0.3%). Midcap stocks are trading in the negative as well with the BSE Midcap index down 0.2%. However, the BSE Small cap index has opened on a flat note. The rupee is trading at 45.30 to the US dollar.

Hotel stocks have opened the day on a mixed note. On one hand, stocks of Hotel Leelaventure and Indian Hotels are trading in the green. On the other hand, Oriental Hotels and Taj GVK have opened the day in the red. Indian Hotels Company Ltd (IHCL) has announced its result for the quarter and financial year 2011 (FY11). For the fourth quarter, IHCL's sales and profit after tax grew by 20% YoY and 56% YoY. For FY11, the company reported a net loss of Rs 872.6 m at the consolidated level despite posting a profit of Rs 1412.5 m on a standalone basis. The loss for the full year was due to the US assets which have not been performing too well. Mr Anil P. Goel, CFO, expressed concerns over the US assets but indicated that the company is moving in the right direction and should make profits in the US assets.

The company had faced unprecedented challenges over the last two years. But there has been improvement in the operations of the company and currently running on full inventory. Also, the company is about to open 10 hotels in the 2011-20112 with the total capacity of 2,143 rooms. By June 2012, the company will see an equity infusion of Rs 4,000 m by the promoters to fuel further growth. The stock of IHCL is currently trading in the green.

Stocks of financial companies have opened the day on a negative note. Reliance Capital, IDFC and IFCI are leading the losses. Rural Electrification Corporation (REC) has recently reported its fourth quarter and full year results for financial year 2010-2011 (FY11). The company recorded a 29% YoY increase in its net interest income for the full year 2010-2011. The growth was on the back of the 25% YoY growth in advances during the year. The net interest margin was higher at 4.34% as compared to the 4.0% seen in FY10. Other income recorded a growth of 39% YoY during the year. Net profits surged by 28% YoY during the year. The company's net non-performing assets (NPA) stood at 0.002% of net advances at the end of March 2011. This is flat on a year-on year basis. REC has declared a final dividend of Rs 7.5 per share which translates to a dividend yield of 3.7% at current prices. The stock of REC is trading in the positive with significant gains.