Profit booking takes toll

Tue, 18 Jun Closing

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Profit booking in power, energy, banking and telecom stocks led the key indices in Indian equity markets to move back into the red after a brief stint in the positive territory. The BSE Healthcare and Metal indices were the only ones to end in the positive. While the BSE Sensex closed lower by 103 points, the NSE-Nifty closed lower by 36 points. The BSE Mid Cap index and the BSE Small Cap index, however, bucked the trend and closed higher by 0.1% each.

As regards global markets, most Asian indices closed lower today while European indices have opened higher. The rupee was trading at Rs 58.81 to the dollar at the time of writing.

As per a business daily, Bharat Petroleum Corporation (BPCL) has signed a joint venture (JV) pact with South Korea's LG Chemicals to set up a petrochemical plant near BPCL's Kochi refinery complex. The state-run oil marketing company plans to spend up to Rs 140 bn over the next five years to expand its Kochi refinery. As per the plan, the company will set up a petrochemical fluid catalytic cracker, which will generate 500 thousand metric tonnes per annum of propylene and would help the company diversify into petrochemicals. The cracker project, which will be set up via the joint venture at an additional cost of Rs 40 bn to 50 bn, is expected to be completed in the next four years along with the refinery expansion plan.

PSU banking major Oriental Bank of Commerce (OBC), is eyeing sale of NPAs worth Rs 10 bn by end of June 2013. The bank's ratio of gross non-performing assets (NPAs) to gross advances rose to 3.21% in FY13 from 2.9% in December, 2012 and 3.2% in March, 2012. The March quarter of FY13 observed one account to the tune of Rs 5 bn turning into NPA as restructuring exercise failed. Though slippages declined by 21% YoY from Rs 13 bn in 4QFY12 to Rs 10 bn in 4QFY13, the provisions stood significantly higher (42% YoY growth) during the quarter resulting into higher provision coverage ratio of 63%.

Also OBC's exposure to stressed sectors cannot be overlooked. In terms of sectoral distribution of advances, the bank is exposed to the extent of 27% to industry, 19% to infrastructure and 6% to commercial real estate which incidentally form the problem areas for the bank as well. While 21% of the total advances is exposed to the infrastructure sector, 13% of the advances are towards power sector and 2% towards telecom. In addition to the same, what stands more critical is the OBC's 56% exposure to the state owned power distribution companies and 39% to the private power companies. The states of Rajasthan (31%), Uttar Pradesh (20%), Haryana (17%), Gujarat (14%) and Punjab (13%) contribute to the total power exposure of the bank and hence is worrisome.