Fed announcement hurts domestic markets

Thu, 19 Dec Closing

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Following the US Fed announcement to kick start with the tapering program, the Indian equity markets closed the day on a weak note. The decline was primarily led by the interest rate sensitive sectors such as Banking, Capital goods and Oil and Gas that witnessed maximum selling pressures today. Whereas stocks from the IT and Pharma space fared well. The BSE Mid Cap and BSE Small Cap indices have underperformed and stood lower by 0.20% and 0.12% respectively. The BSE Sensex closed lower by 151 points and the NSE-Nifty was seen down by 51 points.

On the global front, the Asian indices closed the day on a mixed note but the European indices have opened on an optimistic note. The rupee was trading at Rs 62.22 to the dollar at the time of writing.

Except few such as NHPC Ltd, Guj Ind Power and PTC India Ltd, most of the stocks from the Power sector today ended on a negative note with Reliance Infra and Tata Power facing the maximum selling pressures

As per a leading financial news daily, the ministerial panel would decide soon on coal linkage for NTPC's Jharkhand project. The power producer expects 30% increase in the quantum of coal supply for the 1980 MW project. Back in 2008 the coal ministry had withdrawn fuel linkages for the project on account of conflicts over the location with the power ministry. Later in February this year, it was decided to relocate the project and thus providing the plant a coal linkage.

NTPC has been in the news for a while now - for issues relating to fuel supply and linkages - it must be noted that this is an issue that a small portion of its overall capacity is facing. Plus, the company has been making efforts to improving its fuel supply chain by importing its requirements through the waterway (which would improve the uncertainty surrounding fuel supply at two major plants, thereby freeing up its exiting supply from CIL for other plants). Also, with improving efficiencies and more availability, the company would benefit from the pass through mechanism.

Except few such as Development Credit Bank, J&K Bank and Karur Vysya Bank, all the remaining stocks from the private banking space closed the day on a mixed note today with Kotak Mahindra Bank and YES Bank leading the losers.

As per a leading news daily, the private sector lender, Kotak Mahindra Bank plans to open 100 new branches during the current financial year. This would include 24-34 new branches in rural areas and another 25 in semi-urban areas. As at the end of September 2013, the bank's branch network comprised of around 503 branches. The bank aims to expand this network to over 600 branches by March 2014.

The bank has reported 23% YoY and 31% YoY growth in net interest income and net profits respectively in 1HFY14. During 1HFY14, the bank reported higher growth in current and savings account (CASA) relative to term deposits. Moreover, the bank has been able to nearly double its savings account base within 24 months, by offering 6% interest on the accounts. The branch network expansion plans would further boost the CASA base and aid margins sustenance going forward.