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Drifting towards the neutral zone
Mon, 27 Dec 01:30 pm

Although trading in the green, the Indian markets began to drift towards the dotted line during the previous hour of trade. While most of the sectoral indices are trading firm, the metal and FMCG indices are the top underperformers. Healthcare, consumer durables and IT stocks are amongst the top performers at the moment.

The BSE-Sensex is trading higher by about 40 points (up 0.2%), while NSE-Nifty is trading higher by about 8 points (up 0.1%). Small and mid cap stocks seem to be more in favour today as the BSE-Smallcap and BSE-Midcap indices are trading higher by about 0.6% and 0.3% respectively. The rupee is trading at 45.22 to the US dollar.

Banking stocks are trading mixed with ICICI Bank And Karur Vysya Bank trading firm while Oriental Bank and Dhanlaxmi Bank are trading weak. Yes Bank has asked microfinance institutions (MFI) to return loans worth Rs 1 bn that it had advanced to them by 31 December, 2010. Yes Bank is the first commercial bank to seek such a loan recall. The MFIs have been negotiating with commercial banks for new loans as they battle a crisis of confidence. The amount recalled by Yes Bank amounts to almost one-fourth of its total exposure to MFIs. According to a Morgan Stanley report on bank exposure to MFIs, released in November, Yes Bank has lent around Rs 4.5 bn to MFIs that constitute 1.5% of its total loan book. As a percentage of total loans, Yes Bank’s exposure to the sector is the highest, along with that of IndusInd Bank. It must be noted that MFIs ran into trouble after the Andhra Pradesh government tightened regulations in mid-October.

Stocks of companies that are a part of the consumer durables industry are trading firm led by LLoyd Electric, Titan Industries and Blue Star. The stock of Titan Industries has been in favour over the past few trading sessions. Gains in the stocks are presumably on the back of the company’s plans to aggressively grow its watches business. It was reported earlier that the company was looking at investing heavily to boost sales of its mass brand ‘Sonata’. As low price mass market constitutes majority of the prospective demand, the move is likely to drive growth in future. A leading business has now reported that the company, to achieve the same and also expand reach of its other businesses, is planning to add around 108 outlets in its key verticals of jewellery, watches and eye gear to reach the total strength of retail outlets of 700 by end the of this financial year. As of 1HFY10, the total number of outlets stood at 592. For the same, it plans to spend about Rs 1.7 bn in the current financial year.

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