Banking stocks lead the downfall

Fri, 11 Nov 11:30 am

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Indian stock market indices are trading weak over the last two hours of trade on back of heavy selling activity witnessed across index heavyweights. Banking and Metal stocks witnessed maximum selling pressure, while Pharma and FMCG stocks witnessed maximum buying interest.

The BSE-Sensex is down by 209 points, while the NSE-Nifty is down up 63 points. BSE Mid Cap index and the BSE Small Cap index are down by 1.28% and 1.58% respectively. The rupee is trading at 50.16 to the US dollar.

Aluminium stocks are trading weak led by Hindalco and Nalco (National Aluminium Company Limited). Hindalco Industries Limited has announced results for the quarter ended September 2011. The company has reported an increase of 7% YoY in net sales on back of higher volumes and better realisations and an increase of 15.9% YoY in net profits respectively. EBITDA margin contracts to 10.7% during 2QFY12 from 11.9% in 2QFY11. The margins were severely impacted by the cost escalations and constrained bauxite and coal availability during the monsoon. Other income grows by a staggering 114.5%. Net sales and net profit for the half year ended September 2011 increased by 11.5% YoY and 18.4% YoY respectively. Alumina production was down by 4% this quarter due to constrained supplies and poor quality of bauxite. Unprecedented rains and flood situation in September disrupted coal supplies to the Hirakud captive power plant (CPP), as a result of which there was a temporary slowing down of production in the smelter.

Steel stocks are trading in the red led by Jindal saw and Tata steel. Tata Steel has announced results for the quarter ended September 2011. On a consolidated basis, the company has reported an increase of 15.5% YoY in net sales and 89% YoY decline in net profits. Tata Steel Group, like most others, has been hit by rising input costs and slow demand in its overseas operations. However, its domestic operations are relatively insulated from input cost hikes since it has access to captive raw materials like iron ore and coal. Operating profit was down by 17% YoY. Total costs rose 20% YoY, while raw material expenses climbed 15% YoY in the quarter. The depreciation of the Indian currency against the dollar affected Tata Steel's exposure to foreign currency convertible bonds by Rs 1.5 bn. The company had a net debt of USD $9.2 bn at the end of September.