Realty drags markets lower

Mon, 15 Nov 11:30 am

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After starting today's session on a negative note Indian indices have failed to recoup early losses. However, other key Asian markets are trading mixed with the Nikkei up and the Hang Seng in the red. Currently, heavyweights in the Sensex are trading mixed with stocks from banking and IT space leading the gains. However, stocks from realty and consumer durable space are trading in the red.

Currently, the BSE-Sensex is trading down by around 41 points, while the NSE-Nifty is down by about 14 points. Buying interest amongst the mid and small cap stocks is muted as well with the BSE-Midcap and BSE-Smallcap indices trading lower by 0.7% and 0.6% respectively. The rupee is trading at 45.03 to the US dollar.

Bank stocks are trading weak with Andhra bank and IOB leading the pack of losers. However, Bank of Baroda and SBI are trading flat. PNB has announced its 2QFY11 results. The bank's net interest income increased by 47% YoY in 1HFY11 on the back of 28% YoY growth in advances. Deposits increased 18% YoY led by higher growth in low cost deposits (CASA) during the past two quarters. The bank also improved its net interest margins due to the upward re-pricing of loans. The NIMs in fact improved to 4% at the end of 1HFY11; being one of the highest in the sector. However, the overall delinquency rate for the bank deteriorated with NPAs going up at the gross level from 1.6% in 1HFY10 to 1.9% in 1HFY11 and at the net level from 0.2% to 0.7%. Nonetheless, the provision coverage ratio stood at 77% of gross NPAs, well above the RBI's mandate of 70%. It may be noted that PNB had restructured loans to the tune of Rs 135 bn at the end of 1HFY11, of which loans worth Rs 12 bn had slipped into NPAs.

Tyre stocks are trading mixed with Apollo Tyres and Balakrishna Industries trading firm and Ceat trading weak. As per a leading financial daily, the unprecedented rise in rubber prices has the Indian tyre industry worried. In fact the prices of rubber have doubled in the last year and are expected to rise further. This is because the global rubber production is not expected to rise in line with the demand and crude prices are also not expected to come down. In the domestic market the production of rubber fell to 77,500 tonnes in September against 80,000 tonnes estimated by the Rubber Board. The fall was sharper in October when production was 82,000 tonnes against an estimate of 95,000 tonnes. This shortage is threatening to disrupt the manufacturer of tyres as the tyre industry is left with no option but to scale down production. What further adds to the woes is that rubber shortage is taking place during the peak production period in the country when the Indian industry is fully geared with major expansions and Greenfield projects to meet the demand growth in tyres.