Flat with a negative bias

Thu, 27 Jan 11:30 am

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After starting today's session on a positive note, Indian indices have lost initial ground and are currently trading in the red. However, other key Asian indices are trading with a positive bias. Right now, heavyweights in the Sensex are trading weak with stocks from the healthcare and IT space witnessing selling pressure. However, power and banking stocks are trading flat.

Currently, the BSE-Sensex is trading down by around 67 points, while the NSE-Nifty is down by about 14 points. Buying interest amongst the mid and small cap stocks is muted as well with the BSE Midcap and BSE Small cap indices trading lower by 0.32% and 0.03% respectively.

Banking stocks are trading weak with IndusInd Bank and Yes Bank leading the pack of losers. However, Axis Bank and ING Vysya Bank are trading strong. In a bid to expand its network, ICICI Bank is planning to add 400-500 branches every year over the next three years. The company also plans to focus on financing infrastructure projects in the roads and power space where most of the lenders have been circumspect due to various environmental and execution issues. It may be noted that until 2008 the bank was quite aggressive in giving out personal loans but has gradually shifted its focus on corporate sector financing so as to create a sustainable portfolio with a judicious mix of personal and corporate loans. Presently, the bank has about 2,500 branches and 5,800 ATMs. In order to achieve its growth target the bank is looking for a pan-India expansion, including Bihar, which has seen rapid development of late. Expansion of branches is likely to expand the reach and loan portfolio of the bank in the coming years.

Hotel stocks are trading weak led by Indian Hotels and Taj GVK. Oriental Hotels declared its 3QFY11 results. The company's top line for the quarter grew by 22.8% YoY. This was on the back of economic recovery and increase in demand. The company also benefited from the opening of its new property at Trivandrum and increase of 50 rooms at its Fisherman's Cove property. On a like-to-like basis, the company's sales grew by 9% YoY. Operating margins on the other hand fell by 2.2% to stand at 27.8%. This fall is attributed to increase in costs of goods sold, employee costs and power and fuel costs (all as a percentage of sales). Bottom line of the company, however, fell by 19.7% YoY on the back of fall in other income and higher interest costs. Interest costs increased by 40.5% YoY during the quarter as a result of debt taken by the company to lease the Trivandrum property and to fund its expansion.