Quake in Japan shakes indices

Fri, 11 Mar 01:30 pm

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After trading in the negative territory on the back of profit booking during the previous two hours of trade, the Indian stock markets have failed to recover and are currently trading deep in the red. The earthquake in Japan has had a negative sentimental impact with all the key Asian markets sinking into the red during the last two hours of trade. As far as India is concerned, all the sectoral indices are in the red with stocks from the auto and metals' space leading the pack of losers.

Currently, the BSE-Sensex is down by 220 points while NSE-Nifty is trading 63 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 1.28% and 1.29% respectively. The rupee is trading at Rs 45.24 to the US dollar.

Government data shows that India's industrial output grew faster than expected at 3.7% YoY in January, after hitting a 20-month low of 1.6% growth in December. Manufacturing sector, which accounts for around 80% of industrial production, grew by 3.3% this January after plummeting to 1% in December. The two major surprises were the rebound in electricity and consumer non-durable goods. Electricity sector grew at 10.5% in January this year vis-à-vis 5.6%, whereas consumer non-durable goods grew at 6.9% vis-à-vis a 7% decline in the corresponding month last year.

The capital goods sector continued to disappoint hugely with de-growth of 18.6% in January 2011 as compared to a 57.9% growth in January 2010. It may be noted that the capital goods sector declined by 13.7% in December 2010. This clearly indicates that the expected pick up in capex cycle is yet to come.

PSU Banks are trading weak with United Bank of India and Vijaya Bank leading the pack of losers. Union Bank is planning to enter the wealth management business which is expected to be launched in FY12. Right now, the company is exploring the possibility of finding a partner who has domain knowledge in the area of wealth management. Separately, the bank also plans to raise Rs 11 bn through preferential allotment of shares to the government. Nonetheless, it does not have any immediate fund raising requirements. Further, the bank has also laid down its internal growth targets for the next two years. For FY11, the bank expects loan growth to be in the region of 25%, while deposit growth is expected to increase by 22%. For FY12, the credit growth is expected to be in the region of 22-25%, while deposit growth is expected to be in the region of 18-20%. Lastly, while the bank is comfortable with its current asset quality, if the interest rate hike continues it has indicated a possibility of an increase in NPAs .