Markets consolidating in a flat zone

Thu, 29 Jul 11:30 am

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After starting today's session on a volatile note in the morning Indian indices have slipped into the negative territory. Other key Asian markets too are trading in the red. Stocks from PSU and health care space are witnessing some buying interest while stocks from technology and consumer goods space are trading in the red.

The BSE-Sensex is trading lower by around 36 points, while the NSE-Nifty is lower by about 11 points. Buying interest is also muted amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.05% and 0.02% respectively. The rupee is trading at 46.65 to the US dollar

Banking stocks are currently trading firm led by HDFC Bank and Axis Bank. During the quarter ended June 2010, Yes Bank grew its advances by a whopping pace of 105% YoY. For the full year, the bank is targeting a credit growth of 40% to 50%. To achieve the same, it plans to raise funds both by way of Tier 1 and Tier II capital. A leading business daily has reported that the bank plans to raise Rs 15 bn by March 2011. In the current quarter i.e. 2QFY11, the bank would be raising about Rs 5 bn in the form of Tier-II bonds. This money is being raised for funding infrastructure and agricultural loan growth. It may be noted that Yes Bank had a healthy capital adequacy ratio (CAR) of a 16.6 % (as per Basel-II) at the end of the quarter ended June 2010. However for the bank to grow at a fast pace and meet its growth target for the current year, it would require additional capital. Plus, the bank's management also wishes to maintain the CAR level 15%. While this kind of aggressive growth target is good, the bank needs to keep a close eye on the NPA levels. As of now, NPA levels for the bank stand at 0.04%, which is very comfortable.

Auto stocks are trading flat with Ashok Leyland and Tata Motors leading the pack of losers. However, Hero Honda and Maruti are trading in the green. M&M announced its 1QFY11 results recently. The company is market leader in the tractor segment for the last 27 years. M&M's standalone net sales increased by 22% YoY in 1QFY11 led by strong growth from the automotive and farm equipment businesses. The automotive business grew 28% YoY while the equipment business grew by 15% YoY. Operating profits increased by 27% YoY due to lower employee and other expenses. In line with operating profits, margins expanded by 0.6% and stood at 15% in 1QFY11. Net profits increased 40% YoY during the quarter. This was led by strong operating performance, higher interest income (as against interest expense in 1QFY10) and lower tax outgo during the quarter.