Markets fall deeper into the red

Wed, 9 Dec 12:30 pm

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Selling activity in index heavyweights has caused the benchmark indices to fall deeper into the negative territory after a brief tryst with yesterday's closing levels. While buying activity is being witnessed in stocks from the auto and IT sectors, stocks from metal and banking sectors have failed to elicit sufficient investor interest and are seeing declines currently.

The BSE Sensex is currently trading lower by around 95 points while the NSE Nifty lower by 30 points. Stocks from the midcap and smallcap space are a mixed bag with with the BSE MidCap index trading flat and the BSE SmallCap index trading higher by 0.6%. The rupee is trading at 46.71 to the US dollar.

Domestic pharma major Ranbaxy is planning to sell its 50% stake in its Japanese joint venture (JV) with Nihon Pharmaceutical Industry to its JV partner Nippon Chemiphar. This stake was bought by the company prior to the Japanese Daiichi Sankyo picking up a majority stake of 64% in Ranbaxy. Since Ranbaxy itself now belongs to a Japanese parent, it would make little sense for the company to have a separate JV in Japan to develop its generic business. The company currently supplies about seven drugs to the JV which will be terminated gradually to enable a smooth transition. This move is a precursor to Ranbaxy and Daiichi Sankyo selling their generic drugs in the lucrative Japanese generics market on their own. The stock of Ranbaxy is trading higher currently.

Banking majors ICICI Bank and Kotak Mahindra Bank have upped the ante as far as being competitive is concerned. They have intensified the interest rate war amongst banks in the home loan market by slashing their fixed-cum-floating rate schemes rates. ICICI Bank has launched a home loan scheme under which it will offer loans at an interest rate of 8.25% fixed for the first two years. The floating rates will apply after the first two year. These rates will be applicable to loans sanctioned between December 2009 and January 2010. Kotak Mahindra Bank too has announced its new home loan scheme wherein it will offer 8.49% fixed rate on home loans for 30 months from the date of the payout of the loan. This may affect the margins of these banks in the short term, but since home loans are typical long term in nature, it will give the banks enough time to work on margins by lowering their cost of deposits going forward. Further, it is a move by them to increase the proportion of secured loans on their books in contrast to unsecured loans like personal loans that are more risky, especially in uncertain times like these. While banking stocks are trading mixed, both Kotak Mahindra Bank and ICICI Bank are trading lower currently.