India: Markets Sustain Momentum

Includes: EPI, IFN, IIF, ING
by: Equitymaster

The benchmark indices traded within a narrow range in the final hours of trade. While buying was being witnessed across sectors, select stocks from the telecom, auto and metals sectors witnessed brunt of profit booking. As regards global markets, while the Asian indices closed mixed, the European indices have opened on a positive note.

The BSE Sensex closed almost 470 points higher, while the NSE Nifty closed higher by 120 points. The BSE Midcap and Smallcap indices also closed in the green, each up 2%. The rupee was trading at 49.08 to the dollar.

The markets opened on a positive note and remained in the green thereafter in the ensuing hours of trade. The indices remained buoyant through the trading session as they scaled higher in successive hours of trade.

In the final hours of trade, however some profit booking was witnessed at higher levels. Nevertheless, they closed well above the dotted line. The overall market breadth was positive with gainers outnumbering losers by a ratio of 2.8 to 1 on the NSE. While Jaiprakash Associates (up 17%) and TCS (up 14%) led the pack of gainers on the BSE Sensex today, Hindalco (down 1%) and M&M (down 2%) were at the receiving end.

As per a leading business daily, ING Vysya Bank is planning to raise Rs 945 m by issuing perpetual bonds in foreign currency as Tier I capital. The bank has the lowest capital adequacy ratio (CAR of 10.7%) amongst the private sector banks.

The same has been a deterrent for the bank not just in terms of growth capability but also in terms of Basel II compliance. The fact that the parent ING (NYSE:ING) cannot enhance its stake in the bank (as per the RBI guidelines) from the current level of 43.8%, the bank has been seeking QIP route to raise capital. The move to raise Tier I capital will enable the company to adhere to Basel II norms and continue with its growth objective. While the stock closed lower by 3%, its peers ICICI Bank (up 5%) and Axis Bank (up 7%), closed in the positive.

Emco announced its 2QFY09 results yesterday. The company has reported 25% YoY and 22% YoY growth in topline during 2QFY09 and in 1HFY09 respectively. The higher raw material costs have exerted pressure on operating margins of the company that contracted by 0.3% and 0.2% during the 2QFY09 and in 1HFY09.

Emco's net profits grew by 9% YoY during the quarter and 10% YoY for 1HFY09. The subdued performance at the operating level and higher interest and depreciation costs arrested growth in bottomline. The stock (up 3%), along with its peers BHEL (up 5%) and ABB (up 4%), closed higher.