Realty, banking stocks drag markets

Tue, 26 Jul 01:30 pm

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Indian stock market lost further ground due to selling pressure in heavyweights over the last two hours of trade. All sectoral indices are trading weak. Stocks from realty, banking, auto and capital goods space are losing the most.

The BSE-Sensex is down 300 points while NSE-Nifty is trading 95 points below yesterday's closing. The BSE Midcap and BSE Small cap indices are down by 0.9% and 0.8% respectively. The rupee is trading at 44.25 to the US dollar.

Most of the Auto stocks have been trading weak with Eicher Motors, Mahindra and Mahindra (M&M), Escorts and Tata Motors leading the pack of losers. However, Force Motors and Tube Investments are trading firm. Maruti Suzuki has reported results for the quarter ended June 2011. The bottomline stands at Rs 5.5 bn for the quarter. This implies a year on year (YoY) growth of 18%. The company has registered net sales of Rs 83.2 bn in the first quarter of financial year 2011-12, implying a YoY growth of just over 1%. This is on account of 13 days strike at its Manesar plant. The company has reported total domestic volume of 2.5 lakh units in the first quarter. The operating margin for the company stood at 9.5% during the quarter versus 9.6% seen during the same period last year. The marginal decline was on account of high input costs and forex volatility. The other income jumped 80% on YoY basis. The stock of the company is trading weak.

The Reserve Bank of India (RBI) has hiked key interest rates today for the third time in the last three months in its quarterly review of the monetary policy. In order to control inflation, the repo rates were increased sharply by 0.5%. The central bank has also revised its fiscal-end inflation projection to 7% from 6% earlier. However, the growth projection for current fiscal has been retained at 8%. With the recent hikes, the repo rate (at which the RBI lends to banks) would be 8% and the reverse repo rate (at which it borrows from banks) would be 7%. However, the cash reserve ratio (CRR), the amount all banks need to park with RBI, remains at the same level of 6%. With the latest decision, all loans, including auto, home, personal and other corporate borrowings, are expected to cost more. The industry has expressed its disappointment over the sharp increase in interest rates, saying the move would harm the investment sentiment. The stock market has also reacted adversely, plunging by over 300 points within minutes of the RBI's policy announcement. As per the RBI Governor, inflation, currently above 9%, will continue to guide the policy stance in future. The RBI's next review is scheduled on September 16.