Sensex closes 1% lower for the week

Fri, 25 Oct Closing

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The Indian equity markets seemed choppy today with profit-taking seen across board. As a result, barring IT and Consumer durables, all other sectoral indices closed the day in red. Mid-cap and small cap stocks too faced the brunt and were seen down by around 0.5% each. The BSE Sensex closed lower by 42 points and the NSE-Nifty was seen down by 20 points.

With respect to global markets, the Asian indices have closed on a weak note. But the European markets haven't opened that bad and are trading on a mixed note today. The rupee was trading at Rs 61.54 to the dollar at the time of writing.

Most of the news agencies along with market commentators are anticipating a repo rate hike in the forthcoming monetary policy scheduled on 29th October, 2013. According to a leading financial daily, the Reserve Bank of India (RBI)'s objective, besides the effective monetary policy transmission, is to improve financial market intermediation. Some of the very acute problems faced by the nation today need to be addressed on a priority basis. For instance, RBI has proved successful in narrowing down current account deficit by curbing gold imports. The Central Bank has also undertaken effective measures to tackle rupee volatility. Further, RBI's swap windows have also been aiding to bolster the country's foreign currency reserves by USD 10-15 bn. With these measures in place, RBI is now fighting out the sticky inflation although it means sacrificing growth. While India today is confronted with two major issues of high inflation and high fiscal deficit, the resolution still remains incomplete. And that is the biggest worry for the Governor today. So while the monetary policy is on the fire-fighting mode, 25 bps repo rate cut is on the cards in the upcoming policy.

Except J&K Bank and HDFC Bank, all Private sector banking stocks have closed on a fragile note today with Federal bank and Karnataka Bank facing maximum selling pressures for the day.

In its second quarter earnings for FY14 reported today, the top private sector lender, ICICI bank has reported a strong earnings performance. The net interest income (NII) grew by robust 20% YoY while net interest margins (NIMs) surged to 3.3% levels during 2QFY14. Total advances of the bank have gone up by healthy 16% YoY and the CASA ratio was maintained at 43.3% during the September quarter of FY13. Asset quality for the quarter also marked an improvement with gross NPAs trending down to 3.08% levels. Net NPAs, though went up marginally to 0.85% from 0.82% a year ago. Although provision coverage ratio declined to 73% during the quarter from 75% a year ago, it still stands strong as against the industry averages. Despite the tough market conditions, ICICI bank has successfully registered strong 20% YoY growth in profitability and stands firm vis-a-vis its peers. Consistent earnings performance and resilient balance sheet supported by strong international book and well-performing subsidiaries' business has enthused investors.