Friday April 27, 03:30 PM
Rude awakening? |
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By Equitymaster.com
Markets moved deeper into the red during the final hour of trade as weakness intensified in heavyweights from the energy, pharma and banking sectors. Pressure was also seen in stocks from the telecom, auto, FMCG and metal sectors. At close, the overall market was negative with losers outnumbering gainers by a ratio of 3 to 1 on the NSE.
The BSE Sensex closed at 13,909 (down 320 points) while the NSE Nifty closed at 4,084 (down 94 points). The rupee was trading at 40.98 to the dollar.
Led by 'weaker than expected' performance from some key companies in the March quarter, the markets witnessed a selling spree beginning the very first hour of trade today. The selling pressure never weakened as the benchmark indices maintained their downward momentum till the closing hour. Selling was seen across sectors, with greater than average weakness witnessed in pharma and banking stocks.
PSU banking stocks were among the key losers today, as selling pressure marked trading in SBI (4%), IDBI (3%) and PNB (2%). This weakness was seemingly on the back of reports that quoting the SBI chairman that bad loans (non-performing assets, or NPAs) are on a rise in India with the biggest culprit being the real estate sector. This seems obvious considering that higher inflation has resulted into spiraling interest rates in the Indian economy over the past few months, especially with the RBI taking stern measures to tackle the menace (of rising prices). With inflation remaining above the 6% mark, the central bank is expected to take further steps to cool off the same, and the tools that the RBI Governor has with him is either to directly raise the cost of funds (by raising rates) or to curtail the supply of money flowing to hot sectors like real estate. We have seen a lot of action on both these fronts in the past few months!
Cipla (CIPL.BO, news) was the biggest loser on the Nifty, as the stock closed nearly 15% down from its yesterday's close. Pressure on the stock was imminent following http://www.equitymaster.com/hfyr.asp?symbol=CIPL weak bottomline performance reported by the company for the fourth quarter and full year ended March 2007. Even the revenue growth of 20% YoY for the fiscal has not been pretty good. This weak performance was mainly on the back of poor show on the API exports front. This segment witnessed a marginal decline in sales during the year with the impact being more severe in the fourth quarter 9segment sales down 27% YoY). The management attributed this decline to the high base effect, as FY06 API sales had recorded a significant YoY growth owing to scale up of bulk orders in the global generics market. Also, operating margins for the fourth quarter shrunk by 590 basis points (5.9%) due to a rise in raw material costs (as percentage of sales). Those for FY07, however, remained almost stable as compared to FY06. Cipla's peers in the pharma sector, viz. Glenmark (4%), Sun Pharma (SUN.BO, news) (3%) and Wockhardt (2%) also closed in the red. Ranbaxy, which reported a 22% YoY and 79% YoY growth in topline and bottomline respectively for 1QCY07, closed the day flat.
Bharti Airtel was also amongst the key losers from the Nifty. The stock closed down by over 4%. Among its peers, Idea Cellular and Reliance (RELI.BO, news) Communications (each down 3%) also closed weak. Selling in Bharti was more a reflection of the overall market weakness as this was despite the company turning out yet another quarter and full year of http://www.equitymaster.com/hfyr.asp?symbol=btvl stellar performance. As reported, the company has grown its topline and bottomline by 59% YoY and 89% YoY for FY07, led by a strong 77% YoY growth in subscriber base and improving profitability of operations.
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