Asian stocks have opened the day on a mixed note. While markets in Indonesia (up 0.72%) and China (up 0.25%) are trading firm, the markets in Taiwan (down 0.71%) and Japan (down 0.15%) are trading in the red. The Indian markets have opened the day with marginal losses. Stocks from IT and banking space are leading the losses. However, realty stocks have started the day on a firm note.
The BSE-Sensex is trading lower by around 20 points (0.11%), while the NSE-Nifty is down by around 4 points (0.08%). However, mid and small cap stocks are trading in the green with the BSE Midcap and BSE Small cap indices up by about 0.2% and 0.3% respectively. The rupee is trading at 45.26 to the US dollar.
Infrastructure stocks have opened the day on a firm note with Reliance Infra and Gammon India leading the pack of gainers. Reliance Infrastructure recently announced its 3QFY11 results. The company's top line grew by 14% YoY during the quarter. This was on the back of a strong growth in the company's EPC (engineering, procuring and construction) business. Thanks to the execution of its robust order book, the company's sales from this segment surged by 91% YoY. The current EPC order backlog stands at Rs 235 bn. However, the stellar performance in the EPC business was offset by the company's electrical energy business, which witnessed a decline of 3% YoY during the quarter. This was on account of the 11% YoY decline in the volume of electricity sold. Reliance Infra's operating margins for the quarter improved to 15% as compared to the 13% seen during the same period last year. This was on account of lower cost of power purchased, both in absolute terms as well as percentage of sales. The company's net profits improved by 10% YoY during the quarter. This was on account of higher operating margins, which were offset to some extent by the decline in other income and higher interest costs. The company has approved a share buy-back of Rs 10 bn. The buy-back price has been set at a maximum of Rs 725 per share.
Banking stocks have opened the day on a weak note with Yes Bank, SBI and Federal Bank witnessing selling pressure. SBI, the country's largest lender, has proposed to merge its five remaining subsidiaries with itself over the next 12-18 months. The consolidation exercise has been systemically planned to bring in economies of scale, reduce administrative overheads, redeploy and channelize trained manpower to business development and, in the process, also reduce avoidable competition from different arms of the same group. So far, the bank has already merged State Bank of Saurashtra and State Bank of Indore with itself. However, it would require a government go-ahead to merge the remaining five - State Bank of Hyderabad, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Travancore and State Bank of Mysore. SBI subsidiary employees will have the benefit of getting a pension, in addition to provident fund benefits. SBI is the only public sector player in the country where employees get both the benefits.
A merger of all associate banks has been in the pipeline for many years. After getting a blanket approval to merge all the banks, the SBI management will then decide the sequence. The merger will help SBI get an advantage over its nearest rival ICICI Bank.