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The Indian stock markets started of the day below par and continued to lose steam throughout the session. Markets were probably trading cautiously ahead of key financial results to be announced starting tomorrow with Tata Consultancy Services (TCS) and Infosys (INFY). The indices traded well below the dotted line and the market breadth was negative. While the BSE-Sensex closed lower by around 139 points (down 0.7%), the NSE-Nifty closed lower by around 39 points (down 0.7%). The smaller indices had a relatively better day on the bourses, but they also could not close in the positive. The BSE Mid Cap index and the BSE Small Cap closed 0.1% and 0.2% lower respectively. Most sectoral indices saw declines today with the exception of capital goods stocks. auto and FMCG stocks were the top losers.

As regards global markets, Asian indices had a mixed outing today. European indices opened the day in the negative zone. The rupee was trading at Rs 55.4 to the dollar at the time of writing.

Starting off the results reason, leading housing finance company HDFC announced its results for the first quarter of the new financial year 2012-12 (1QFY13). The company reported a profit after tax growth of 19% over the previous year. The year-on-year (YoY) growth in its retail (individual) loan book, including loans sold stood at 29% whereas the non individual loan book grew by 14% YoY. The growth in the total loan book inclusive of loans sold stood at 23%. The Net Interest Margin for 1QFY13 was 4%, compared to 4.4% at the end of FY12 and 4.2% at the end of 1QFY12. Thus the company has been seeing some pressure on margins on account of elevated borrowing costs. Gross non-performing assets as at June 30, 2012 amounted to 0.79% of the loan portfolio, compared to 0.83% in the previous year. At the end of the quarter, HDFC's capital adequacy ratio stood at 14.6% of the risk weighted assets, as against the minimum requirement of 12%. Tier 1 capital was 11.8% against a minimum requirement of 6%. The stock closed 0.6% lower in trade today.

Hindustan Zinc Ltd (HZL), may face pressure on its margins, as prices have fallen sharply in the first quarter of the new financial year. Three-month zinc prices on the London Metal Exchange (LME) have declined 5.4% since March 31, while spot prices on the Bombay Metal Exchange have gone up by 4.7% in the same period, in Indian currency. The company is however trying to implement a multi-pronged strategy to increase production, improve recovery of metals from the ore, and removing bottlenecks from the production process. The company expects all this to contribute in cost optimisation and help take pressure off operating margins.

HZL has begun an additional smelting plant for lead, which is in short supply, and most of the benefits will accrue in FY13. Production capacity will go up to 185,000 tonnes this year from 85,000 tonnes previously. Silver production is expected to will rise to 350 tonnes this year and to 500 tonnes next year. The company expects global demand for zinc to increase at 3-4% per year. Demand for metals in India is however expected to grow at a faster pace of 8-10% per year. The stock closed 1.4% lower in trade today.

Source: India Markets Wednesday Wrap-Up: Indian Stock Markets Tread Cautiously