Markets surge in the final hour

Wed, 18 Aug Closing

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The Indian indices opened on a strong note and remained rangebound for the larger part of today's session. However, in the later hours, buying activity across index heavyweights intensified and led the indices to close well into the positive. While the BSE Sensex closed higher by around 208 points (up 1%), the NSE Nifty gained around 65 points (up 1%). The BSE Midcap and BSE Smallcap also did well to notch gains of 1% each. Gains were largely seen in IT, FMCG and metals stocks.

As regards global markets, Asian indices closed mixed today while European indices have opened in the red. The rupee was trading at Rs 46.59 to the dollar at the time of writing.

As per a leading business daily, India's exports growth in July has slowed down due to weak consumer demand in its key markets such as the US and Europe. Growth in July stood at 13.2% which is the lowest in six months. Infact, exports grew more than 30% in the five preceding months partly due to the base effect as exports were sluggish in 2009. Meanwhile, the scenario in the developed world is not too bright. US is not expected to recover anytime soon in the coming months as the stimulus measures come to an end and unemployment continues to remain high. Europe is still grappling with huge debt burdens. Having said that, imports grew at a faster rate of 34.3% indicating growing manufacturing activity. This increased India's trade gap for the month to US$ 12.9 bn.

PSU banking stocks closed mixed today. While IDBI Bank and Bank of Baroda found favour, Corporation Bank and Bank of India closed in the red. IDBI Bank declared its 1QFY11 results recently. Net interest income grew by 171% YoY in 1QFY11, on the back of 38% YoY growth in advances. Capital adequacy ratio stood at 11.9% at the end of June 2010. This is expected to go up to 13% post the government's capital infusion. Net interest margins rose to 1.6% from 0.8% in 1QFY10 due to the rise in CASA proportion from 12% in 1QFY10 to 13% in 1QFY11. IDBI's other income fell by 39% in 1QFY11 due to lower treasury gains, bringing the non-interest income to 35% of total income in 1QFY11 from 60% in 1QFY10. Net NPA to advances were stable at 1.2% in 1QFY11, as was the case in 1QFY10. IDBI's cost to income ratio went up to 37% in 1QFY11 from 29% in 1QFY10.

As per a leading business daily, Tata Steel has been granted working permission for an iron ore mine in Ankua, Jharkhand. The total area of the mine is 1,800 hectares and it is said to be holding about 400 m tonnes (MT) of iron ore. It must be noted that Tata Steel is expanding its steelmaking capacity at its Jamshedpur facility to 10 MT by next year and is looking to source iron ore from the Ankua mine. Tata Steel sources all its iron ore requirements from its captive iron ore mines and the Ankua mine is expected to strengthen its raw material security further. It must be noted that in the June 2010 quarter, Tata Steel witnessed a significant improvement in operating margins both on a standalone and consolidated basis as there was a huge drop in raw material costs. The stock closed firm today.