Indian Markets Wednesday Wrap-Up: Indices Sustain Momentum

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Includes: EPI, HDB, IFN, IIF, TTM
by: Equitymaster

After two days of lackluster trade, markets ended firm today with the benchmark indices advancing by more than 2% on account of sustained buying activity witnessed throughout the trading session. The Sensex closed higher by around 300 points, while the Nifty ended higher by around 90 points. Stocks from the mid-cap and small-cap indices also ended in the green. While buying was witnessed across sectors, select stocks from the energy, FMCG, pharma and banking sectors witnessed selling pressure. Rupee closed at 48.86 against the US dollar. While the Asian markets ended mixed, the European indices are trading lower currently.

Banking sector stocks closed mixed. HDFC Bank (NYSE:HDB) announced its 3QFY09 results a few hours before. The bank has reported 69% YoY growth in interest income during 9mFY09 on the back of 44% YoY growth in advances due to the integration with CBoP. The net profit margins remained stable at 4.3% despite a fall in the proportion of CASA (CASA level lower at 40%). The bank reported 40% YoY growth in fee income during the same period under consideration. The operating expenses grew by 56% YoY due to the merger, while cost to income ratio stood at 53%. The bank witnessed net NPA to advances ratio move up from 0.2% in FY08 to 0.6% in 9mFY09. The bank had raised Tier II capital in 3QFY09 to adhere to Basel II norms and continue with its growth plans. The same has helped the bank to report comfortable capital adequacy ratio (CAR) of 13.7% in 3QFY09.

As per a leading business daily, the domestic automobile industry, which saw its sales figures crashing to an eight-year low in the September-December quarter, will launch 50 new models this year in an attempt to revive its fortunes. It remains to be seen as to what extent these new launches help auto majors to grow and increase their market share amidst global recession and economic slowdown. Further, 75% to 80% of the launches are in the small car space. This will further intensify competition in this segment. Auto sector stocks closed on a firm note with the major gainers being M&M, Tata Motors (NYSE:TTM) and Bajaj Auto.

The economic slowdown and high ticket prices resulted in negative growth in the number of domestic passengers in 2008. The aviation industry which reported a whopping 32.5% YoY growth in 2007 has witnessed 5% YoY decline in domestic passenger traffic in 2008. With less number of people flying, the airline industry is faced with issues of poor finances. Reduced cash inflows effects airport development projects among other things.