Markets end the week 3% lower

Fri, 6 May Closing

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The benchmark indices reversed their losing streak as the Indian stock market finally closed in the green today. The BSE-Sensex gained in the region of 308 points whereas the NSE-Nifty closed higher by around 92 points (up 1.7%). The smaller indices also saw gains, but they came in slightly lower. The BSE Midcap and BSE Small cap indices gained 0.9% and 0.7% respectively. Banking and auto stocks led the rally. Although all the indices closed in the positive today, during the week the BSE Sensex lost around 3%.

It was, however, a different story for other Asian indices. Most indices closed the day in the red, with Japan leading the losers. Europe is currently trading mixed. The rupee was seen trading at Rs 44.74 to the dollar at the time of writing.

Union Bank of India (UBI) was one of the top gainers in the markets today despite reporting a flat growth in profits as per its full financial year results. The bank, however, saw a significant increase in net interest income, which rose by 48% YoY during the financial year 2011 (FY11). Advance growth also came in 27% higher. The net interest margin also improved from 2.7% in FY10 to 3.3% in FY11. The bank faltered when it came towards providing for pensions and gratuity expenses for its employees. This came in at Rs 12.7 bn for the year.

However, in terms of asset quality, the net NPA (non performing assets) ratio deteriorated slightly to 1.2% from 0.8% previously. As per the current increasing interest rate scenario, and due to the RBI's recent rate hike, Union Bank has revised its base Rate by 0.5% from 9.5% to 10% p.a. (per annum). The bank also increased its prime lending rate from 13.8% to 14.3%. The revision in interest rate would have an impact on customer's borrowings which have floating interest rate structures linked to either of these rates. Most banking stocks closed positive for the day with UBI closing over 10% up.

Leading pharma company, Cipla recently announced its results for the full financial year (FY11) and the quarter. Revenues grew by 12.3% YoY in FY11 led by the bulk export and formulation exports businesses. Operating (EBDITA) margins decreased by 2.9% on account of higher raw material costs due to the changes in product mix and higher employee expenses. The bottomline decreased by 10.6% YoY in FY11 due to higher depreciation charges and as a consequence of the higher base effect from last year. The higher bottom-line in FY10 was an outcome of one-time exceptional income on sale of its emergency contraceptive brand 'i-pill' to Piramal Healthcare. For the quarter (4QFY11), profits fell by 22% on account of lower other income and higher interest and depreciation costs. The lack of the one-time gain of Rs 950 m in the fourth quarter last year also contributed to the profit decline. The stock ended the day marginally higher.