India Markets Monday Wrap-Up: Pressure In Final Hour Grips Index

by: Equitymaster

Indian stock markets opening on a positive note and traded in the green for most of the day. However, in the final hour of trade, selling pressure mounted and the index moved below the dotted line. While the BSE-Sensex closed lower by around 74 points (down 0.4%), the NSE-Nifty closed lower by around 21 points (down 0.4%). The BSE Mid Cap and the BSE Small Cap had a worse outing as they closed lower by 1.6% and 1.8% respectively. IT and Healthcare sectors performed well, however realty and metal sectors saw the maximum losses.

With regard to global markets, Asian indices closed in the positive today, with India as an exception. European indices however opened on a negative note. The rupee was trading at Rs 50.29 to the dollar at the time of writing.

India's headline inflation remained above the 9% mark for the eleventh straight month. This once again complicates matters for the RBI. After 13 rate hikes banks and industry were hoping that rate hikes would be over for good. Annual wholesale price inflation (WPI) in October stood at 9.73% versus 9.72% in September 2011. Prices for energy and food continued to remain high on account of supply constrains and rupee depreciation despite a fall in global commodity prices.

Shriram Transport Finance Co recently announced its results for the second quarter of the financial year 2011-12. Interest income grew by 12% YoY in 2QFY11 along with a healthy growth in assets under management of 20%. Disbursement growth however slowed down on account of economic uncertainty and the rising interest rate cycle. Slower growth in Index of Industrial Production (IIP) and execution issues in infra projects across the country also led to a slowdown in disbursements. Net interest margins improved marginally to 7.9%, from 7.8% 1HFY11. Other income declines by 2% in 2QFY12, for the half it increased by 12%. Net profits remain flat, growing by only 0.2% YoY in 2QFY12 on account of higher provisioning. Gross NPAs increased to 2.69% from 2.54% earlier, while the net NPA ratio declined to 0.41% in 1HFY12 from 0.5% in 1HFY11. Provisions were increased on account of a Rs 600 m write-off of assets in the mining belt, which was hit by a ban earlier this year. The company also declared an interim dividend of Rs 2.5 per share. The stock closed lower for the day.

Mahindra and Mahindra Ltd (M&M) closed almost 6% lower on the bourses today on account of lackluster profit numbers. The company recently announced its financial results for the second quarter of the financial year 2011-12 (2QFY12). Gross revenues were up around 34% YoY in the September quarter. In the passenger utility vehicle segment, the company continued to maintain a dominant market share of 54%, and the number of vehicles sold increased by 14% YoY. Its new global vehicle, XUV500 was able to gain significant traction. Its domestic tractor business was able to grow faster than the industry, clocking in a 28.5% YoY growth. However, on the profit front, the performance was not so robust. The net profits were up only 3% YoY. Profits included a Rs 320 m impact on account of the fall in the value of the rupee and adjustments in its external commercial borrowings (ECBs).