Auto and realty push markets higher

Tue, 27 Jul 11:30 am

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After starting today’s session on a volatile note, Indian indices have managed to register some gains in the last two hours of trade. However, other key Asian markets are trading in flat to negative territory. Stocks from auto and realty space are witnessing strong buying interest while stocks from power and consumer goods space are trading in the red.

The BSE-Sensex is trading up by around 74 points, while the NSE-Nifty is up by about 10 points. Buying interest is also witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.4% and 0.2% respectively. The rupee is trading at 46.84 to the US dollar

Bank stocks are trading flat with IDBI Bank and PNB leading the gains. However, IndusInd Bank and Axis Bank are trading in the red. Punjab National Bank announced its results recently. The bank reported a 45% YoY and 28% YoY growth in net interest income and net profits, respectively. Interest income grew by 16% YoY due to strong growth in advances. Growth in advances was led by loan growth in corporate and agricultural segments.

NIMs improved marginally to 3.9% in 1QFY11 due to higher proportion of CASA deposits and decline in cost/income ratio. The cost/income ratio was at 40% in 1QFY11 as against 45% in 1QFY10. Fee income grew by 13% YoY in 1Q FY11 while capital adequacy ratio stood at 13.8%. NPAs went up at the gross level from 1.6% in 1QFY10 to 1.8% in 1QFY11 and at the net level from 0.2% to 0.7%. The bank had one of the highest provision coverage ratios (of 93%) in the sector a year back. However, it has declined from the early highs to at about 78% of gross NPAs, well above the RBI’s mandate of 70%. PNB restructured loans to the tune of Rs 130 bn at the end of 1QFY11, of which loans worth Rs 10 bn have slipped into NPAs.

Consumer durables stocks are trading mixed with Rajesh Exports and Blue Star leading the gains. Blue Star Ltd’s fully-owned subsidiary Blue Star Electro-Mechanical Ltd will acquire the Rs 1.3 bn Mumbai based plumbing and fire fighting business contractor D.S. Gupta Construction Pvt Ltd for Rs 800 m. With a current order book of Rs 3 bn, Blue Star’s estimates that it should be able to increase sales of that portion of business by 10%. Blue Star’s order backlog at the end of June stood at Rs 19.7 bn. The promoters of D S Gupta Construction will continue as advisors till July 2011. The acquisition is at decent valuations and is in line with Blue Star’s decision to move towards one vendor and offer huge spectrum of services