Sensex Opens Lower; Metal & IT Stocks Drag

Tue, 31 Jul 09:30 am

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Asian stock markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.3% while the Hang Seng is down 0.5%. The Shanghai Composite is trading down by 0.1%. Meanwhile, a broad sell-off of technology stocks pushed the three major US stock indices lower on Monday, with the Nasdaq Composite posting its third consecutive loss of more than 1% for the first time in three years just days after hitting a record high.

Back home, India share markets have opened the day on a lower note. The BSE Sensex is trading down by 82 points while the NSE Nifty is trading down by 28 points. The BSE Mid Cap index opened and BSE Small Cap index opened the day up by 0.3% & 0.1% respectively.

The rupee is currently trading at 68.75 to the US$.

Speaking of small-cap stocks, they seem to be displaying withdrawal symptoms right now.

But as Ankit Shah, Editor of Equitymaster Insider says, such corrections are a healthy part and parcel of the game of investing.

In one of his earlier editorials, he had shown how the BSE Sensex is not a truly representative market barometer. While the Sensex continues to stay steady close to its all-time high levels, the rest of the market has corrected significantly.

Recently, he carried out a similar study on the BSE Smallcap index.

Here's what he found...

The average (both mean and median) correction of the BSE Smallcap index stocks has been 38% from their respective 52-week highs.

Small-Cap Stocks Are Down 38% from Their 52-Week Highs

Ankit believes that the ongoing market correction could offer some fantastic buying opportunities for disciplined and patient small-cap investors.

Moving on... Sectoral indices have opened the day on a mixed note with realty stocks and power stocks witnessing maximum buying interest. While, metal stocks and IT stocks have opened the day in red.

In the news from the telecom sector. In the latest development, Idea Cellular Ltd on Monday reported its first quarterly net profit after six quarters of losses, on the back of a one-time gain on the sale of its 9,900 standalone telecom towers to ATC Telecom Infrastructure Pvt Ltd in May.

Idea Cellular reported a consolidated net profit of Rs 2.6 billion for the June quarter, compared to a loss of Rs 8.1 billion a year ago.

The company's consolidated revenues from operations fell 27.9% to Rs 58.9 billion on the back of the ongoing tariff war in the telecom sector and a steep reduction in domestic and international mobile termination charges (MTC) settlement rate.

The revenue for the quarter was impacted mainly on account of down-trending of the average revenue per user (ARPU), Idea Cellular said, adding that ARPU for the quarter stood at Rs 100 compared to Rs 105 in the March quarter.

During the June quarter, Idea Cellular's competitors reported subdued ARPUs due to aggressive pricing prevalent in the industry. Bharti Airtel reported an ARPU of Rs 105 for its India operations during the quarter. Reliance Jio, the telephony arm of Reliance Industries Limited reported an ARPU of Rs 134.5 for the June quarter.

Further, Idea Cellular hopes that long-term opportunities in the sector will continue to remain attractive while near term challenges persist.

Idea Cellular share price opened the day down by 1.7%.

Moving on to the news from bank sector. Axis Bank's first-quarter net profit dipped 46.3% to Rs 7 billion, year on year, on the back of higher provisions and lower other income.

The bank's net profit was Rs 13.1 billion in the same quarter last year. The bank had posted a net loss of Rs 21.9 billion in the January-March quarter.

Axis Bank increased provisions by 42.5% during the quarter to Rs 33.4 billion from Rs 23.4 billion in the year-ago quarter. In the January-March quarter, the bank had set aside Rs 71.8 billion as provisions.

Gross non-performing assets (NPAs), as a percentage of total advances, were 6.5% in the June quarter compared with 6.8% in the March quarter and 5% in the year-ago quarter.

Post-provision, the net NPA ratio was 3.1% against 3.4% in the January-March quarter and 2.3% in the year-ago quarter.

Net interest income, or the difference between interest earned on loans and that paid on deposits, increased 11.9% to Rs 51.7 billion from Rs 46.2 billion in the corresponding period last year.

Other income, which includes core fee income, dropped 2.5% to Rs 29.2 billion in the three months ended 30 June from Rs 30 billion a year ago.

Axis Bank share price surged 2.1% in the opening session today.

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