Sensex Opens Lower; Asian Paints Falls on Weak Q2 Result

Tue, 23 Oct 09:30 am

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Asian stocks are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 2.2% while the Hang Seng is down 2.2%. The Shanghai Composite is trading down by 1.6%. Meanwhile, the S&P 500 and the Dow fell in choppy trading on Monday as energy and financial stocks lost ground and caution grew ahead of a slew of earnings reports this week.

Back home, India share markets have opened the day on negative note. The BSE Sensex is trading down by 252 points while the NSE Nifty is trading down by 79 points. The BSE Mid Cap index opened the down by 0.5% while BSE Small Cap index opened the day down by 0.6%.

All sectoral indices have opened the day in red with FMCG stocks and energy stocks witnessing maximum selling pressure.

The rupee is trading at Rs 73.75 against the US$.

Paints stocks opened the day on a mixed note with Asian Paints and Berger Paints leading the losers. Asian Paints posted a 14.4% fall in second quarter profit.

The company reported a net profit for the September quarter at Rs 4.9 billion. The company had reported Rs 5.8 billion during the same quarter of last year, which included profit on account of discontinued operations of Rs 0.7 billion.

Its revenue rose to Rs 46.4 billion against Rs 42.7 billion (ex-excise duty) that was posted during the corresponding quarter of last year.

At an operating level, the earnings before interest, taxes, depreciation and amortization (EBITDA) fell to Rs 7.8 billion against Rs 8 billion.

The operating margin came in at 16.9% against 18.8% year on year.

The company further said that decorative business segment in India saw a low double-digit volume growth.

In the international operations, business continued to remain challenging with issues like forex unavailability, high inflation and difficult economic conditions impacting performance.

Asian Paints share price opened the day down by 5.6%.

To know more about the company, you can access to Asian Paints latest result analysis and Asian Paints' 2017-18 Annual Report Analysis on our website.

Moving on to the news from the economy. As per the Moody's Investors Service, the profitability of Indian banks is distinctively weak compared with those in the association of five major emerging national economies: Brazil, Russia, India, China and South Africa.

The rating agency, however, said that the profitability will improve from next fiscal as asset quality stabilises. Moody's said capitalisation is the weakest for Indian banks with a tangible common equity ratio of 8.7% at the end of 2017.

Reportedly, system-wide asset quality in India is weak due to stressed public sector banks, which dominate the sector. It said, government capital infusions will boost weak public sector banks' capital ratios.

Further it said that the system as a whole is unprofitable due to high credit costs at dominant state-owned banks, adding the profitability is distinctively weak for Indian banks than others in the five-nation BRICS bloc.

According to the report, Brazilian and South African banks have the highest return on assets.

The Moody's report on banks in BRICS countries said Indian lenders had the second highest non-performing loan at 2017-end, followed by banks in Brazil, South Africa and China. Russian banks had the highest ratio of 11.8%.

Brazilian banks had a non-performing loan ratio of 3.5% at the end of 2017, compared with 2.9% for South African banks and the lowest of 1.5% for Chinese banks.

Since we are talking about PSUs, lets see how these PSU stocks performed compared to the frontline index - BSE Sensex.

The BSE-PSU index, which includes many companies from the PSU space, considerably underperformed the BSE Sensex.

Underperformance of BSE PSU Index

For three out of five years, the BSE-PSU index considerably underperformed the BSE Sensex. From 2014 till date, the BSE-PSU index gave a meagre annualised return of 3%. Whereas, the BSE Sensex delivered 14%.

This underperformance can be attributed to sector specific events such as non-performing assets (NPAs) in the banking space and rising oil prices that impacted OMCs, among others.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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