Heavyweights continued to support market gains as the Indian stock markets continued their journey in the positive zone over the last two hours of trade. Stocks from the realty and banking space are the main gainers.
The BSE-Sensex is trading up by 304 points while NSE-Nifty is trading 92 points above the dotted line. BSE Midcap index is up by 1.6% while the BSE Small cap index is trading up by 1.4%. The rupee is trading at 44.99 to the US dollar.
Banking stocks are currently trading on a positive note with ICICI Bank and Bank of Baroda leading the pack of gainers. The country's largest bank, State Bank of India (SBI) has cut back its growth estimates for the current fiscal year. The management has indicated a cut back in the loan growth target by 6% for the current fiscal year. The reason for this is the increase in interest rates. Mr Chaudhury expects the higher interest rates to have a negative impact on the demand for credit. Particularly for the long-term credit as well as for equipment finance. The bank now forecasts loan growth to be in the range of 16-20% as against its previous forecast of 22%. Following SBI's move, ICICI bank has also cut back its forecast for loan growth for the current fiscal. It now expects loan growth to be in the range of 18-20% as against its earlier forecast of 25%. The Reserve Bank of India (RBI) has hiked interest rates for the tenth time in 15 months in its recent policy meeting. The higher interest rates are expected to lead to a cutback in the demand for credit.
Automobiles stocks are trading firm led by Hero Honda and Mahindra & Mahindra (M&M). As per a leading financial daily, rising interest rates coupled with the rise in fuel prices is a threat to auto demand in the country. After the spectacular show in 2010, auto sales have dipped in recent times. As a result, most auto manufacturers are offering substantial discounts to boost sales. Industry leader, Maruti Suzuki has decided to offer discounts in the range of Rs 15,000 to Rs 26,000 on many of its models. In addition to the discounts, car manufacturers are also reworking their sales strategies. Some have also decided to increase their marketing budgets for the current year. Maruti has hiked its marketing budget by nearly 20%. While these measures may help boost the revenues, they will most likely have an adverse impact on the company's margins in the short term.