IT, telecom aid the rise

Tue, 9 Feb 11:30 am

   Previous Close   

   Pre-Open   

   09:30 am   

   01:30 pm   

   Closing   

After starting on a weak note, the Indian stock markets managed to rise above the dotted line during the previous two hours of trade. Currently, stocks from IT, telecom, auto and FMCG sectors are managing to garner investors' interest. However, selling activity is being witnessed in oil & gas and realty sectors.

The BSE-Sensex is trading up by around 89 points and the NSE-Nifty is up by around 28 points. Currently, the BSE-Midcap and BSE-Smallcap indices are trading up by 0.5% and 0.7% respectively. The Rupee is trading at 46.66 to the Dollar.

According to a leading business daily, the RBI is planning to de-regulate all lending rates from the coming fiscal. It plans to scrap the system of lending linked to the benchmark prime lending rate (BPLR) and replace it with a base rate, which will be the minimum rate at which banks will be allowed to lend. This move will be a step towards freeing of lending rates for loans to small and medium enterprises as well as export and farm sector.

It may be noted that BPLR lending had issues like lack of transparency as 70% of the bank lending were below the BPLR. Many a times the banks were borrowing funds at higher rates and were compromising on the loan pricing so as to encourage credit offtake. By doing this they compromised on risk provisioning for possible slippages. This system was also less responsive to the changes in monetary policy as banks continued with higher prime lending rates despite monetary easing by the RBI. The BPLR system also transmitted as fairly higher rates making loans inaccessible to weaker sectors. The public sector banks were at a major disadvantage as they usually charged lower lending rates as against their aggressive private sector peers. We believe that the new base-rate lending regime will do well in overcoming the previous shortfalls along with making loans available to the needy.

As per a leading business daily, Indian apparel major Raymond, is focusing on its retail business with the aim to increase its revenue from this stream by 40% in the next two years. The company presently earns around Rs 10 bn from its retail business, around 70% of its topline. The company plans to expand retail business by opening another 300 stores majorly in the smaller towns. Raymond currently operates 500 stores, 80% of which are on the franchise basis. Though the opportunities for branded apparel look lucrative in the growing tier II and tier III cities in India, Raymond will bear higher cost of operating the extended retail network which may continue to impact the company’s bottomline in the medium term.