A rally likely: Thursday Closing Report

Watch for 5,460 on the Nifty

A decline in economic growth in the December quarter, which was at an over two-year low, saw the market snapping its two-day gain and closing lower today. A marginal decline in factory output numbers for February also weighed on the market. The downtrend on the Nifty may see a pause soon. The index is likely to see an upmove to the level of 5,460. The National Stock Exchange (NSE) saw a volume of 86.29 crore shares today.

The market opened lower tracking the weak Asian markets in morning trade, following US Federal Reserve chairman Ben Bernanke deferring an announcement of any new policy package that would steer growth. The Nifty opened 19 points down at 5,366 and the Sensex resumed trade at 17,715, a cut of 38 points over its previous close.

Although in the red, the indices touched their day’s highs in early trade with the Nifty at 5,372 and the Sensex at 17,718. However, all-round selling pressure led all the sectoral gauges lower. A marginal fall in manufacturing activity in February, as shown by the HSBC Factory PMI, also weighed on the investors.

A lower opening of the key European markets added to the woes in post-noon trade. Besides, the 5% stake sale in ONGC also saw investor interest shift towards the company. The benchmarks fell to their day’s lows a little after 2.00pm. At the lows, the Nifty went down to 5,298 and the Sensex dropped to 17,463.

Bargain hunting, after the indices hit the lows, helped the market pare some of the losses in late trade but the gain lacked strength to push the market into the positive. Finally, the Nifty closed 45 points lower at 5,340 and the Sensex declined 169 points to 17,584.

The advance-decline ratio on the NSE was 708:1039.

Among the broader indices, the BSE Mid-cap index declined 0.53% and the BSE Small-cap index fell 0.38%.

BSE Healthcare index (up 0.25%) was the lone gainer today. The top sectoral losers were BSE Realty (down 3.29%); BSE Capital Goods (down 1.62%); BSE Bankex (down 1.20%); BSE Oil & Gas (down 0.95%) and BSE Auto (down 0.90%).

The top Sensex gainers were Maruti Suzuki (up 4.64%); Hindalco Industries (up 1.35%); HDFC (up 0.98%); Tata Power (up 0.91%) and Coal India (up 0.09%). The losers were led by DLF (down 5.17%); Mahindra & Mahindra (down 3.67%); BHEL (down 2.97%); NTPC (down 2.54%) and ICICI Bank (down 2.44%).

The Nifty toppers were Maruti Suzuki (up 5.20%); Ambuja Cement (up 3.27%); Siemens (up 2.48%); Reliance Power (up 2.22%) and Cairn India (up 1.84%). The key losers were DLF (down 6.40%); M&M (down 3.94%); IDFC (down 3.75%); BHEL (down 3.06%) and Axis Bank (down 3.04%).

Markets in Asia settled mostly in the negative as the US Fed chairman on Wednesday refrained from announcing any fresh measures to boost the economy. A fall in bank lending in China in February resulted in the Chinese and Hong Kong markets settling down while profit booking saw the Nikkei 225 closing in the red.

The Shanghai Composite lost 0.10%; the Hang Seng tanked 1.35%; the Jakarta Composite slipped 0.58%; the Nikkei 225 fell by 0.16%; the Straits Times dropped 0.51% and the Taiwan Weighted lost 0.04%. Bucking the trend, the KLSE Composite gained 0.24% and the Seoul Composite surged 1.33%. At the time of writing, the key European indices recovered from their early losses and were marginally in the positive and the US stock futures were trading higher.

Back home, foreign institutional investors were net buyers of stocks totalling Rs579.63 crore on Wednesday. On the other hand, domestic institutional investors were net sellers of equities aggregating Rs431.07 crore.

Tata Communications (TCL) today said it is considering an acquisition bid for London-listed telecommunication giant Cable & Wireless Worldwide Plc (CWW). TCL said "considerations are at a very preliminary stage and there can be no certainty that an offer will be made”. The stock added 0.15% to close at Rs234 on the NSE.

In a move which should caution power developers to avoid illegal dumping of waste like excavated debris, the Department of Forests, Environment and Wildlife in Sikkim has fined NHPC Rs75 lakh for violation of forest laws and unauthorised dumping of muck at Elaichi Khola and the area downstream of Teesta Stage V in East district. The stock gained 1.89% to close at Rs21.60 on the NSE.

At a time when overall credit growth in the economy is slackening, Pune-based non-banking finance company Bajaj Finance (BFL), is focussing on retail lending opportunities in India. It expects to expand its loan book at 25-30% in FY11-12.The stock dipped 2.34% to close at Rs772 on the NSE.


Fresh round of loan recasts to be riskier for banks, says Barclays

‘We are concerned about the high level of loan restructuring being undertaken by the domestic banks:’ Barclays report.

The banking system is likely to face a bigger challenge from the restructured accounts in the current environment than they had faced after the global credit crunch following the sub-prime crisis during 2008-10, says a Barclays report.

"We are concerned about the high level of loan restructuring being undertaken by the domestic banks because we expect their experience with loan restructuring in the current environment to be worse than in FY09 and FY10," the research report said. As per the report, the monetary easing played a major role in easing debt burdens in the past round of debt restructuring, which is not the case in the present situation.

"Monetary easing played a major role in easing debt burdens in the past. Furthermore, borrowers were also able to recapitalise and manage their debt burden by taking on unhedged forex liabilities. These factors are unlikely to be repeated in the current round," the report notes. The report, however, points out restructuring standards in the country are not stringent.

"Restructuring standards appear lax and (to) create perverse incentives...specifically, restructuring is allowed even if the promoter 'sacrifice' is only 15 percent of the bank's sacrifice. Hence, borrowers can restructure with very little sacrifice, which we believe reduces the discipline that the threat of default normally places on the borrower," it warns.

It also says the provisioning norms are relatively low in comparison with those of other Asian economies and don't confirm to the accounting principles of conservatism.


Business gets worse for private life insurers; MetLife bucks trend

‘The life insurance industry registered a growth in their overall first year premium collection in January this year:’ IRDA

Indicating tough times ahead for the private life insurers, first-year premium, an indicator of new business growth in the sector, dipped by 15% last month, although MetLife bucked the trend.

As per the latest data released by sector regulator IRDA, the life insurance industry registered a growth in their overall first year premium collection in January this year.

However, the private sector players continued with a downward trend and their first year premium dipped by 15% from January 2011 levels to Rs2,451.22 crore. The decline in January 2012 was worse than the previous month December 2011, when the first year premium of private life insurers dipped by 8%.

Private player MetLife, however, saw its first year premium grow 232% in January 2012 to Rs203.6 crore. Helped by its better-than-peers performance, MetLife India became the fifth largest among 23 private sector life insurers in the country in January, up from its sixth position in the previous month. It was ranked 15th in April 2011.

As per IRDA data, MetLife's market share has also doubled to 3.8% in the first ten months of the current fiscal (April 2011 to January 2012), from 1.9% in the same period of the previous fiscal. For the month of January 2012, MetLife commanded a share of 8.3% in total new premium for private sector, up from 6.86% in the previous month. This is the highest market share in a month since its inception.

The total new premium for the sector, including that of state-run LIC, stood at Rs9,543 crore in January 2012, up 15% from Rs8,301 crore in the same month last year.

LIC's new business grew by 31% last month, while its market shares rose to 74% from 65% in January 2011. The business conditions have not been very encouraging in the insurance sector in the recent past and the IRDA chairman J Harinarayan said earlier this month that the sector would see a de-growth of 13%-14% this fiscal.

The first year premium of life insurers declined by 17% to Rs71,952 crore as on 31 December 2011 in the current fiscal, down from Rs86,697 crore in the year-ago period. The decline in the business of private insurers was higher at 20% compared to the state-owned insurer, Life Insurance Corporation of India, which suffered a 15% dip in the first-year premium.

Bank of America Merrill Lynch said in a recent report that the top-line growth of the Indian insurance industry has already taken a big hit after the new regulations.


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