Indian Markets Monday Wrap-Up: Metals, Realty Lead the Decline

The Indian markets ended the day on a weak note as selling activity persisted till the final minutes of trade. Towards the end of the day, the overall decline to advance ratio was poised at 4 to 1 on the BSE. The BSE-Sensex ended the day lower by around 440 points, while the NSE-Nifty closed lower by about 180 points. Stocks from the mid-cap and small-cap spaces ended the day on a weak note as well, recording losses of 5.6% and 5.9% respectively. Selling activity was witnessed in stocks from across the board led by realty, metal, banking and capital goods. Stocks from the IT space, on the other hand, ended the day in the green.

Other Asian markets ended the day on a mixed note. The European indices are currently trading in the red. Rupee was trading at 47.6 against the US dollar at the time of writing.

Banking stocks ended the day on a weak note led by Yes Bank, ING Vysya Bank, and Axis Bank. As per a leading business daily, ICICI Bank plans to shift its focus areas in the secured assets category (housing, car, infrastructure and corporate loans) going forward. As such, the bank will limit its exposure in the unsecured loans segment (personal loans). However, while the bank believes that the shift in segments will not reflect in its balance sheet within the next twelve months, it expects its growth to rise to about 24% YoY to 25% YoY (from the secured category) during the fiscal. On an overall basis the bank expects total loan growth to remain below 20% YoY during the fiscal. It may be noted that ICICI Bank had witnessed decline in its domestic retail and corporate loans portfolio to 61% of its total asset book at the end of FY09 as compared to 71% a year earlier.

Telecom stocks ended the day on a weak note led by Reliance Communications, Spice Communications and MTNL. As per a leading business daily, the management of Bharti Airtel believes that call charges in India are not likely to drop further going forward. And this would be despite the increasing competition. In fact, it believes that the rates are currently at their bottom. It may be noted that call charges in India are amongst the lowest in the world. The reason telecom companies have been able to offer such cheap service is on account of large volumes. For instance, Bharti Airtel records nearly 1.5 bn minutes of usage per day. This is another reason why the management feels that call rates will not drop further. As newer players will not have such large volumes (minutes of usage), it would be difficult for them to sustain profitability in the long run.