Metals & realty push markets higher

Wed, 1 Sep 11:30 am

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After starting today's session on a positive note in the morning Indian indices have managed to hold on the gains. Other key Asian markets are trading in the positive territory as well with Nikkei (up 1.1%) leading the pack of gainers. Currently heavyweights in the Sensex are trading strong with stocks from realty and metals space witnessing strong buying interest. However, stocks from health care and FMCG space are trading flat.

Currently, the BSE-Sensex is trading up by around 143 points, while the NSE-Nifty is up by about 40 points. Strong buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 1.3% and 1.5% respectively. The rupee is trading at 46.91 to the US dollar.

NBFC stocks are trading strong with Cholamandalam Invst and SREI Infrastructure leading the gains. However, M&M Finance and Reliance Capital are trading weak. As per leading news daily, India's largest home finance company, HDFC has raised its prime lending rate (PLR) by 50 bps for housing loans that come into effect from September. It should be noted that this is the first time since August 2008 the mortgage lender has increased its PLR. HDFC has raised its benchmark lending rate to 14.25%. This move is likely to make home loans costlier. HDFC follows a three-month reset cycle for its floating rate loans and hence the change in revised PLR will impact all existing customers over the next three months. The hike in the lending rate is in line with the hardening of interest rates in the economy. It should be noted that along with HDFC a host of lenders like SBI and ICICI bank have also raised their benchmark lending rates following the hike in key short term borrowing and lending rates.

Textile stocks are trading strong with Bombay Dyeing and SRF Ltd leading the gains. Alok Industries announced its 1QFY11 results recently. Topline increased by 40% YoY during 1QFY11. This was mainly due to strong growth in company's garment business which increased 66% YoY during the quarter supported by the more stable home textile business which increased 29% YoY. Improved volumes and higher realizations helped EBIDTA margins to grow by 2% during the quarter. The expansion in operating margins is coming from the move towards value added fabrics. However, going forward expansion in margins may be capped as inputs costs rise. Bottom line too registered a strong growth during the quarter but was impacted by interest cost and negligible other income.