The Nifty may make an upmove to the level of 5,500 subject to dips
With most of the Asian indices opening in the positive, the Sensex and the Nifty opened strongly higher on news of the European leaders having come up with a plan for a single financial supervisory mechanism for the European region to help stabilize markets. Yesterday we had mentioned that The Nifty should now break out of the range of 5,080 and 5,160 decisively to set a trend. We may now see the index making an upmove to the level of 5,500 subject to dips. The National Stock Exchange (NSE) saw a higher volume of 79.29 crore shares.
The Sensex and the Nifty hit their intra day lows of 17,135 and 5,189 respectively at the beginning of the day itself after which they continued their upward journey to hit their intraday highs, the best in the past two months. The Sensex scaled 17,448, which was the highest since 20 April while the Nifty hit a high of 5,286 its best since 23 April. The Sensex closed at 17,430, up 430 points (2.59%) while the Nifty gained 130 points (2.52%) to settle at 5,279. This is the highest percentage gain since 6 June 2012.
The advance-decline ratio on the NSE was tilted in favour of the gainers at 1273:449.
Among the broader indices, the BSE Mid-cap index surged 1.62% and the BSE Small-cap index climbed 1.31%.
All the sectoral indices were positive. The top gainers in the sectoral space were BSE Capital Goods (up 3.65%); BSE Power (up 3.55%); BSE Bankex (up 3.49%); BSE Metal (up 3.44%); BSE Realty (up 2.47%).
Except for Coal India which fell 0.14%, all the other Sensex stocks closed in the green. The key gainers on the Sensex were Jindal Steel (up 8.74%); Tata Power (up 5.81%); ICICI Bank (up 5.03%); BHEL (up 4.93%); Sterlite Industries (up 4.91%)
Top two A Group gainers on the BSE were-GMR Infrastructure (up 9.11%) and Jindal Steel (up 8.74%).
Top two A Group losers on the BSE were-Cairn India (down 6.11%) and Muthoot Finance (down 2.91%).
Top two B Group gainers on the BSE were-DJS Stock (up 19.98%) and Vimal Oil & Foods (up 19.95%).
Top two B Group losers on the BSE were-Kanco Enterprises (down 14.90%) and Rama Pulp & Papers (down 13.50%).
The Nifty was led by Jindal Steel (up 8.49%); Tata Power (up 6.12%); Sterlite Industries (up 5.33%); BHEL (up 4.84%); Maruti Suzuki (up 4.33%). Cairn India (down 6.14%); BPCL (down 1.22%); Coal India (down 0.24%) settled at the bottom of the index.
Yesterday, the finance ministry issued draft guidelines for implementing the controversial anti-avoidance tax proposal. A panel of seven members suggested that the provisions be applied from 1 April 2013. However, the Prime Minister's office (PMO) today clarified that the GAAR guidelines are only draft guidelines and have been put out for receiving wide-ranging feedback and for discussion purposes only.
The Reserve Bank of India (RBI) today unveiled its fifth Financial Stability Report. The report said that though the Indian financial system remains robust, risks to financial stability have increased over the past six months due to worsening global and local economic conditions. RBI said that banks remain resilient to credit, market and liquidity risks and would be able to withstand macroeconomic shocks, given their comfortable capital adequacy positions.
Among the other positives, Morgan Stanley has upgraded Indian stocks to "equal weight" after being 'underweight' since the first quarter of 2011, saying India is now trading at a price to book multiple of 2.1x, close to the trough valuations of 2.0x in the 2002 and 2008 cycles.
All Asian indices ended in the positive on optimism from the European leaders about recapitalizing the continent's banks. Besides, the Chinese government assured investors that the country continue with reforms despite a slowdown in growth. The Hang Seng was the top gainers among Asian indices, up 2.19% followed by KOSPI Composite up 1.91% and Taiwan Weighted up 1.77%.
At the time of writing, all the European indices were trading in the positive. The US stock futures were also higher, indicating a positive start to the markets.
Back home, enthused by the draft guidelines on GAAR and the PMO's clarifications on the same, foreign institutional investors were net buyers to the tune of Rs3,046.76 crore. On the other hand, domestic institutional investors were net sellers of shares totalling Rs250.71 crore.
Kalpataru Power Transmission has secured new orders worth of Rs660 crore from international and local clients. The company has received contract worth of Rs380 crore Power Grid Corporation. The company has secured another project around Rs280 crore from Electricity Generating Authority of Thailand. The stock rose 1.03% to close at Rs83.15 on the BSE
OnMobile Global hit a new low, tanking over 8.12% to close at Rs 30.55, despite the company denying reports of a probe order against company's promoter and chief executive officer (CEO) Arvind Rao.
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The brokerage, however, has advised clients to buy on declines
HDFC Bank has been downgraded to 'accumulate' from 'buy, by brokerage firm Kotak Securities. It believes that HDFC Bank has outperformed the Sensex during last one month by giving 12.6% return vis-à-vis 6.5% return given by the Sensex during the same period, and therefore has limited upside from current levels (Rs548). It has given a target price of Rs590, based on four times its estimate of the bank's 2013 adjusted book value of Rs146.7 per share.
According to the report, one of the characteristics of HDFC Bank, which keeps it way above its peers, is its liability franchise. It said, "It has consistently delivered one of the highest Current Account-Savings Account (CASA) mix in the industry (48.4% as of 4th quarter of the 2011-12 fiscal). Its healthy liability franchise has been aiding in delivering one of the best net interest margins (NIM) in the industry." Its NIM stood at 4.2% during the most recent quarter on back of improvement in lending yields.
CASA ratio is the proportion of current accounts to savings account. A higher CASA is better for the bank as it keeps down the costs of funds, as current account costs nothing, whereas savings account attracts deposit fees towards customers. While, NIM is the key profitability yardstick by which various banks are compared.
Most banks depend on the retail segment to attract deposits. In HDFC Bank's case, according to the report, the retail segment has driven the loan growth during last three to four quarters. "They (HDFC Bank) have the ability to gain market share in advances by leveraging its distribution networks. Over the years, they have grown their loan book 4%-5% faster than the system growth. We believe future loan growth is likely to track its deposit mobilization," said the report. The share of retail book has grown to 54.8% at the end of Q4FY12 as compared to 49.9% at the end of Q4FY11.
In times of difficulty, much of the bank's future profitability hinges on its ability to manage bad loans, or non-performing assets (NPA) in banking parlance. The report said, "HDFC Bank's asset quality is comfortable with gross and net NPAs coming at 1% and 0.2% respectively at the end of FY12. Slippage was also contained at around 1% during FY12, well below the industry average." In HDFC Bank's case, it seems to be controlling its NPAs while its peers are not doing so well.
The higher the provision coverage ratio, the better, as it provides some breathing room in case the economy gets worse. According to the report, it said, "Its provision coverage ratio is also healthy at 82.4% at the end of Q4FY12, which provides a cushion to its earnings with any unforeseen deterioration in its asset quality in the future. Lower restructured book (0.4% at the end of FY12) further reduces the risk of any big negative surprise in the future."