Markets down 2% for the week

Fri, 27 Jul Closing

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Indices in the equity market in India came off the day's highs during the closing stages but still managed to close strongly in the positive. While BSE Sensex edged higher by 200 points (up 1.2%), gains on the NSE-Nifty came in at around 60 points. BSE Mid Cap and BSE Small Cap indices however chose to go the other way and closed lower by 1% each. Nearly four stocks gained for every one that closed the day in the negative on the Sensex.

While most Asian indices closed in the green today, Europe too is trading mostly positive currently. The rupee was poised at Rs 55.4 to the dollar at the time of writing.

The markets which had moved in a lacklustre fashion all through the week, suddenly jumped to life today. The trigger, we believe, came from the chief of the European Central Bank who opined that the bank will pull out all stops to ensure that the Euro survives. Investors construed this as another big stimulus measure and thus bought into most risky assets across the globe. However, we believe that it would be dangerous to pin one's hopes on such events. Investors would be better served if they study the fundamentals of the business and invest only from a long term perspective.

ICICI Bank declared the results for the first quarter of financial year 2012-2013 (1QFY13) today. The bank has reported 32% YoY growth in net interest income and 36% YoY growth in net profits for the first quarter. The bank's net interest income grew by 32% in 1QFY13 on the back of 22% YoY in advances while net interest margin (NIM) improved to 3.0% from 2.6% in 1QFY12. ICICI Bank's cost to income ratio which reduced to 42% from 44.7% in 1QFY12 also boosted profits. Capital adequacy ratio was healthy at 18.5% at the end of June 12 and offers enough headroom for growth. Also the net NPAs remained stable at 0.6% of advances in 1QFY13 as was the case in 4QFY12 (0.9% in 1QFY12). The healthy growth in bottomline was largely due to higher interest margins and other income. This is despite increase in provisioning which enhanced coverage ratio to 80.6% in June 2012. The stock closed more than 2% higher on the bourses today.

Bajaj Electricals, one of India's largest manufacturers of consumer durables, announced its 1QFY13 results yesterday. While its topline grew by a strong 22% YoY, bottomline growth came in at a modest 8% YoY. The 0.4% fall in operating margins as well as the steep 35% jump in interest expenses caused the damage to the bottomline of the company. The margins were down mainly on account of steep depreciation of the rupee as it hurt the company's imports. Going forward though, the company is hopeful of putting up a good show and hopes to improve its profits second half of the year onwards. The stock closed down by around 2% today.