Banking, realty keep markets weaker

Mon, 27 Aug 01:30 pm

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The Indian equity markets continued to trade in a range bound manner albeit in the red zone during the post noon trading session. Currently, stocks from the Oil and gas, FMCG and healthcare sectors are the only ones finding favour as their respective indices are trading firm, while those of others are trading in the lower. banking and realty stocks are amongst the top under performers at the moment.

The Sensex today is trading lower by about 45 points (down 0.3%), while the NSE-Nifty is down by about 25 points (0.5%). Midcap and smallcap stocks are also trading weak with the BSE Mid Cap and BSE Small Cap indices down by about 0.3% each. The rupee is trading at 55.61 to the US dollar.

Banking regulatory body Reserve Bank of India (RBI) has said that a nearly 50% plunge in large capital investments has caused GDP to slow down to a nine-year low of 6.5% in FY12. At Rs 2.1 trillion, the new and large projects that were sanctioned financial assistance in FY12 were 46% lower from year-ago levels, as per the RBI annual report. The slump was led by lower investments in the infrastructure and metal sectors. Investments in infrastructure fell by 52% to Rs 1 trillion mainly on account of lower capex by the power and telecom sectors. The share of infrastructure in overall corporate fixed investments in large projects has slipped from 54.8% to 48.6%. Even the flow of credit to the infrastructure sector has decelerated on account of policy delays and higher interest rates. While investments in the telecom sector have dried up, the power sector has been impacted by widening losses of State Electricity boards (SEB's). The report states that the banks have a significant exposure of about Rs 3.3 trln to the power sector which will have to be restructured and may become non-performing. The report notes that apart from investment slowdown in the power sector, investments in FY13 are likely to be hit by falling interest in PPP projects in the road sector.

Stocks of FMCG companies are trading firm led by United Breweries, Hindustan Unilever and Godrej Consumer. As per a leading business daily, ITC's paperboard and specialty paper division's is awaiting land allotment for its brownfield expansion in Andhra Pradesh. The capex towards this project is believed to be Rs 35 bn. As per the company, this matter has now part of projects under consideration by the Prime Minister's Office, which is looking into various issues relating to implementation hurdles. As per the company, it requires about 1,000 acres of land for expansion. This would enable ITC to double its capacity from the current level of 0.5 m tones annually. The company's management expects this process to take a period of about six months to clear, after which it would be seeking others clearances.