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Banking stocks aid in cutting losses
Fri, 18 May 01:30 pm

While the Indian stock markets continued to trade below the dotted line, buying interest during the previous two hours led the indices to cut their losses of the first half. Stocks from the banking space are currently in favour followed by stocks from the oil & gas and FMCG spaces. Auto and engineering stocks are trading weak at the moment.

The BSE-Sensex is trading lower by about 75 points (0.5%), while the NSE-Nifty is down by about 30 points or 0.6%. Stocks from the mid and small cap spaces are also trading weak with the BSE Mid Cap and BSE Small Cap indices down by about 0.6% and 0.8% respectively. The Rupee is trading at Rs 54.79 to the US dollar.

Stocks of investment and financing companies are trading mixed with SREI Infrastructure Finance, Shriram Transport Finance, Housing Development Finance Company (HDFC) trading weak while Infrastructure Development Finance Company and Bajaj Finance are trading firm. A leading financial daily has reported that higher interest rates and tight liquidity led to sluggish growth in the loan portfolio of housing finance companies (HFC's) in FY12. According to National Housing Bank data, the outstanding loans on the books of 54 HFC's grew by 18% YoY as compared to 22% YoY growth registered last year. Public sector banks backed by low-cost savings and current account deposits were able to maintain 18% growth in the loan portfolio for the period April-December 2011. NHB has projected home loans to grow by 18-20% in FY13.

Majority of the public sector bank stocks are trading in red with Andhra Bank and Union Bank being the biggest losers. State Bank of India (SBI) declared its FY12 (financial year 2012) results recently. The bank's net interest income grew by 33% YoY for the full year FY12. This was on the back of a 15% YoY growth in advances. For the full year, SBI's net profits rose by 42% YoY in FY12. The bank's other income fell by 9% YoY for the full year FY12. As for the NIMs (net interest margins), the bank managed to contain the cost of funds as NIMs moved up from 3.3% in FY11 to 3.5% in FY1. However, at the same time, Net NPAs levels increased to 1.8% in FY12 from 1.6% in FY11. At the gross level the NPA levels moved up from 3.3% in FY11 to 4.4% in the current year. At the end of the year, capital adequacy ratio stood at 13.9% at the end of FY12 as per Basel II, compared to 12% at the end of FY11.

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