Rising commodity prices especially that of copper gave Indian markets yet another cold shiver today as indices ended the day deep in the negative. The benchmark indices succumbed to concerns over lower industrial growth and high inflation. This was in the backdrop of gains in global markets. The BSE-Sensex closed with losses of around 261 points (down 1.4%) whereas the NSE-Nifty closed 83 points lower (down 1.6%). BSE Midcap and BSE Small cap indices took a heavy beating today, closing lower by 2.4% and 3.2% respectively.
While Asian indices closed mixed today Europe has opened on a positive note. The rupee was trading at Rs 45.28 to the dollar at the time of writing.
Most metal stocks saw heavy selling pressure, with JSW Steel losing over 8%. Tata Steel is planning to raise around US$ 500 m for its capital expenditure plans over the long term and to reduce its debt levels. The company plans to opt for a perpetual bond for the same, so that it doesn’t have to factor any further dilution for its shareholders and promoters. The company recently completed a follow on offer (FPO) raising Rs 37 bn. The promoter stake came down by around 2.4% in the FPO.
These perpetual bonds will be treated as part of equity capital, but they do not dilute holdings. They do not have a specific maturity date. They continue to make interest payments till perpetuity. The interest payments are quite high however, as they need to be serviced forever. The company may be looking at international markets to raise these bonds. The stock closed down for the day.
OBC recently declared a strong set of results for the third quarter and nine month ended December 2010. The bank grew its net interest income and net profits by 18% and 41% respectively during 3QFY11. Also its net interest margins improved from 3% to 3.1% over the past 12 months. The bank’s gross and net PA levels went slightly higher from 1.6% and 0.8% respectively in 3QFY10 to 1.9% and 0.9% in 3QFY11.
Meanwhile India’s Trade Ministry has assured that there are no fears of contraction in India's industrial output growth as the manufacturing sector is doing well. India's annual industrial output in November grew at its slowest pace in 18 months. While India's exports in December 2010 rose 36.4% YoY to US$22.5 bn, imports for the month fell 11.1% YoY to US$ 25 bn.