Asian stock markets have opened the day on a negative note. It follows from the negative sentiment surrounding global stock markets as S&P (Standard & Poor) downgraded US government debt yesterday. Benchmark indices in China (down 1.9%), Japan (down 1.5%) and Hong Kong (down 1.4%) are leading the pack of losers. The Indian stock markets have opened the day on a weak note as well. Heavyweights in the IT and power sector are leading the losers' pack. However, healthcare and FMCG stocks are witnessing buying interest.
The BSE-Sensex is trading lower by around 19 points (0.1%), while the NSE-Nifty is down by around 3 points (0.05%). Midcap and small cap stocks are trading in the positive however, with the BSE Midcap and BSE Small cap indices up by about 0.03% and 0.2% respectively. The rupee is trading at 44.58 to the US dollar.
Banking stocks have opened the day on an upbeat note. HDFC Bank, IDBI Bank and Axis Bank are leading the gainers' pack. India's third largest lender HDFC Bank released its full year results (FY11) yesterday. The bank reported a 23% YoY increase in its net interest income for FY11. This was on account of the 27% YoY growth in advances during the period. Net interest margin remained stable at 4.2% mainly due to the higher proportion of lower cost deposits. Other income grew by 9% YoY during the year. Net NPAs improved to 0.2% in FY11. It stood at 0.3% last year. Capital adequacy ratio stood at 16.2% at the end of FY11. The bank has rewarded its shareholders with a dividend of Rs 16.5 per share. At the current prices, this works to a dividend yield of 0.7%. The Board has also approved a stock split in the ratio of 1:5. Post the split, the face value of the share would be Rs 2. Banks have seen an increase in loan demand during recent times. However, in the light of the rising interest rates, whether this growth would continue or not, remains to be seen.
Power stocks have opened the day on a mixed note with Tata Power and NTPC trading weak, while Reliance Power and Suzlon are trading in the green. Tata Power plans to raise US$ 300-400 m through a hybrid form of financing to part-fund its expansion plans. The company will do so by issuing 60-year bonds with a lock-in period of 5 years. The capital will be raised through an overseas subsidiary and will be guaranteed by Tata Power.
A hybrid security is one which has characteristics of both debt and equity. It facilitates higher flexibility for corporate financing while reducing capital costs for issuers. This kind of fund raising is quite popular in the US and Europe. Tata Power has also said that the funds raised through hybrid securities could be utilised to secure further long-term coal supplies by investing in coal mines or assets outside India and also for repayment of the existing loans. The forthcoming projects of the power firm include the 4,000 MW ultra mega power project at Mundra in Gujarat. Its first unit is expected to be commissioned in August 2011.