Friday Closing Report: Share prices may see slow decline

Indices record sharpest decline in four days on dull earnings outlook 

Contrary to our expectations, the Indian market opened with marginal gains as its Asian peers picked up momentum despite the news of another earthquake striking the north-eastern coast of Japan on Thursday. The Sensex added 12 points at the opening at 19,603 and the Nifty was a point up at 5,887. Realty, banking and fast-moving consumer goods counters witnessed good demand in early trade. The indices scaled the day's high within the first half hour. At the day's high the Sensex had added 106 points at 19,697 and the Nifty was up 41 points to 5,927.

Then the market saw a sudden bout of selling, which pushed the indices into the red soon after they touched the day's peak. Subsequently, trading was sluggish and the indices dropped to intra-day lows in the last hour. The Sensex fell to 19,388, a decline of 203 points and the Nifty retraced 64 points to 5,822. The market closed off those levels-the Sensex at 19,451, a decline of 140 points, and the Nifty at 5,842, down by 44 points. Today's decline was sharper than on Thursday. The advance-decline ratio on the National Stock Exchange was 587:1504.

The broader indices lagged behind the Sensex today, with the BSE Mid-cap index declining 1.25% and the BSE Small-cap index tanking 1.40%.

BSE Realty (down 2.52%), BSE Auto (down 1.87%), BSE Consumer Durables (down 1.48%), BSE PSU (down 1.37%) and BSE Oil & Gas (down 1.33%) were the top sectoral losers. BSE Fast Moving Consumer Goods (up 0.39%) and BSE Capital Goods (up 0.15%) were the only sectoral gainers.

In the Sensex space, Bharti Airtel (up 1.56%), ITC (up 0.88%) and Larsen & Toubro (up 0.51%) were the gainers worth mentioning. The laggards were led by Jaiprakash Associates (down 3.77%), DLF (down 3.73%), Hindalco Industries (down 2.99%), Tata Motors (down 2.84%) and Reliance Infrastructure (down 2.12%).

Chief economic advisor to the Union finance ministry, Kaushik Basu, has said that although inflation has not gone out of hand, it is still not in the comfort zone. While the Reserve Bank of India had been following a tight monetary policy to control inflation, the government is also doing its best, he said. Although India is on a high growth trajectory, inflation and corruption were the two big clouds looming over the country, Mr Basu said.

Markets in Asia, led by the Nikkei, settled mostly higher as the tremors that rocked northern Japan yesterday resulted in little damage and spared the nuclear power plants. Shipbuilders in Korea helped the Seoul Composite close higher, while the Chinese and Hong Kong market witnessed institutional buying.

The Shanghai Composite gained 0.74%, the Hang Seng rose 0.47%, the Jakarta Composite advanced 0.30%, the Nikkei 225 jumped 1.85%, the Straits Times gained 0.49% and the Seoul Composite was up 0.27%. On the other hand, the KLSE Composite lost 0.28% and the Taiwan Weighted lost 0.08%.

Back home, foreign institutional investors were net buyers of stocks worth Rs220.59 crore on Thursday, while domestic institutional investors were net sellers of stocks worth Rs212.16 crore.

KEC International (up 0.18%) today announced its foray into the water business with its first order worth Rs31 crore. The order is from the Water Resource Department of the Madhya Pradesh government. The project involves renovation, repairs and remodelling of canals under the Urmil Tank Project in Chattrapur district of Madhya Pradesh.

Tech Mahindra (down 1.22%) has secured a contract to manage the IT systems of Vodafone Hutchison Australia (VHA) for five years. The total value of the contract is estimated at about $250 million. As per the contract , the Indian IT services major will cover day-to-day IT operations and infrastructure such as servers and data centres (including break/fix support) across both of VHA's mobile brands-Vodafone and '3'-in addition to application maintenance and management.

Tata Steel's (down 1.23%) output and sales registered a smart increase in 2010-11 compared to the previous fiscal, following the successful implementation of its expansion plan. Production of hot metal increased by 3.8% to 7.5 million tonnes (MT) in 2010-11, from 7.231 MT in the previous year. Crude steel production touched 6.855 MT against 6.564 MT. In addition, saleable steel production rose by 3.9% to 6.691 MT in 2010-11.


Banks lending more money to students for higher education

Education loans through banks have grown by 20% in the past couple of years. That’s the fastest ever, and banks want to push that further to 30%-40% going ahead

The season of college admissions has begun and banks are gearing up to facilitate maximum education loans to students. Going by the comments of banking experts, the education loan portfolio has gained momentum and is set to grow multi-fold.

As per the latest report of the Reserve Bank of India (RBI), education loans have increased to Rs43,801 crore in the year to February 2011, from Rs36,522 crore in the previous corresponding period, which is a significant growth of 19.93%.

According to a senior official of the Punjab National Bank (PNB), "Our education loan disbursal has been showing significant growth. As of 31 December 2010, we disbursed around Rs2,750 crore towards education from our Rs21,700 crore retail loan portfolio. Going ahead we are optimistic about the growth of this sector." He added, "Last year we posted a growth of 46% in our education loan portfolio; the current growth is 24%. Though, our volumes are increasing."

Efforts by banks to create awareness and promote education loans are evident. "The sector has grown at 30%-40%.  Large numbers of students going for higher education are approaching banks for loans to fund their studies," said K Unnikrishnan, deputy chief executive, Indian Banks' Association.

However, post the global recession of 2008, the education loan portfolio which has the lowest default rate has witnessed increasing cases of defaults. But banks are not too worried as the non-performing loans have come back to earlier levels.

Vivek Mhatre, general manager, retail, at Union Bank of India, told Moneylife, "Our NPAs on the education loan portfolio are minimal. Since 2008-09, our portfolio has doubled to Rs1,600 crore and we want to increase it by 30-40%. When a student opts for higher education from a premier institute like Indian Business School or IIM, the default risk is almost zero as these institutes have good placement facilities. Now the season of education loans has begun and we are already receiving a steady stream of proposals." Mr Mhatre explained that "as per RBI guidelines there is no collateral required for loans up to Rs4 lakh, so this category has some default rate, but we have a monitoring mechanism in place and there is nothing to worry about."

The government's interest subvention scheme for students from families that have an income of less than Rs4.5 lakh, will also help the default rate to come down. "The interest subvention scheme will significantly bring down the credit default risk involved in education loans," Mr Unnikrishnan said.

Explaining the low NPAs on PNB's education loans portfolio, a bank official said, "Our loan portfolio has picked up in the last 3-4 years and the repayment of those loans is yet to begin, so currently there is no worry of any NPA. Also, there is not much debt on our books pertaining to this portfolio."

State Bank of India (SBI) is the leading player in the education loans segment with 25% of the market share. As per its March 2010 annual report, education loans grew by 34.61% in the year to March 2010.

Mr Unnikrishnan explains, "Banks today, have realised the potential of education loans and lot of effort has been put by them. The loan processing has become faster and going further the growth rate is expected to be consistent. SBI has 25% market share in this portfolio and others like Indian Bank also have a significant amount of education loan portfolio."

Currently, as per RBI guidelines, banks can provide a maximum loan of Rs10 lakh for studies in India and Rs20 lakh for studies abroad.


ARSS Infrastructure wins two orders worth Rs167.65 crore

ARSS won its first BOT based road project worth Rs123 crore from MPRDC. It has also won an order worth Rs44.65 crore to construct a high level bridge over river Brahmani in Odisha

Bhubaneswar based ARSS Infrastructure Projects has won two new work orders worth Rs167.65 crore.

The first order is for construction of road from Damoh-Bhatiagarh-Hirapur on build-operate-transfer (BOT) basis worth Rs123 crore from Madhya Pradesh Road Development Corporation Ltd (MPRDC). The total length of the road is about 69.60km.

The other order is for construction of high level bridge over river Brahmani near Jenapur at 15th km of Kuakhia to NH-200 road via Jenapur in the district of Jajpur, Odisha under NABARD Assistance RIDF XVI. The project is to be completed within three years from the date of commencement of work and the order is worth Rs44.65 crore.

Sunil Agarwal, President& CEO, said, "The order from MPRDC is the first BOT order we've received in road projects, this order closely follows on the heels of the PPP order for the bus terminal we received from the Odisha govt in March."

On Friday, ARSS Infra ended 3.30% down at Rs594.80 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.71% to 19,451.45.


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